UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended ~~June 30, 2020~~March 31, 2021


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

For the transition period from __________ to __________

Commission File Number: 0-7617

UNIVEST FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


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

14 North Main Street, Souderton, Pennsylvania 18964

(Address of principal executive offices) (Zip Code)

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

Not applicable

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

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


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

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

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

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

Large accelerated filer

☒☐

Accelerated filer

☐☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

☐

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

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


Common Stock, $5 par value						~~29,226,738~~29,379,575
(Title of Class)						(Number of shares outstanding at ~~July 23, 2020)~~April 30, 2021)

Table of Contents

UNIVEST FINANCIAL CORPORATION AND SUBSIDIARIES

INDEX

Page Number

Part I.

Financial Information:

Item 1.

Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets at ~~June~~March 3 01 , ~~2020~~202 1 and December 31, ~~201~~20920

Condensed Consolidated Statements of Income for the Three ~~and Six~~Months Ended ~~June~~March 3 01 , 20 202 1 and ~~201~~20920

Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Six~~Months Ended ~~June~~March 3 01 , 20 202 1 and 201920

Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three ~~and Six~~Months Ended ~~June~~March 3 01 , 20 202 1 and 201920

Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30~~March 31 , 20 202 1 and 201920

Notes to Condensed Consolidated Financial Statements

Item 2.

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

5040

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

6955

Item 4.

Controls and Procedures

Part II.

Item 1.

Item 1A.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

7256

Item 3.

Defaults Upon Senior Securities

7256

Item 4.

Mine Safety Disclosures

Item 5.

Item 6.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


		(UNAUDITED)					(UNAUDITED)
(Dollars in thousands, except share data)	(Dollars in thousands, except share data)	At June 30, 2020		At December 31, 2019		(Dollars in thousands, except share data)	At March 31, 2021			At December 31, 2020
ASSETS	ASSETS								ASSETS
Cash and due from banks	Cash and due from banks	$	57,234	$	50,571	Cash and due from banks	$	35,117		$	62,555
Interest-earning deposits with other banks	Interest-earning deposits with other banks	291,295		74,557		Interest-earning deposits with other banks	152,200			157,303
Cash and cash equivalents	Cash and cash equivalents	348,529		125,128		Cash and cash equivalents	187,317			219,858

Investment securities held-to-maturity (fair value $208,307 and $194,886 at June 30, 2020 and December 31, 2019, respectively)		201,703		192,052
Investment securities available-for-sale (amortized cost $196,846 and $251,014, net of allowance for credit losses of $855 and $— at June 30, 2020 and December 31, 2019, respectively)		194,201		246,924
Investment securities held-to-maturity (fair value $139,298 and $156,325 at March 31, 2021 and December 31, 2020, respectively)						Investment securities held-to-maturity (fair value $139,298 and $156,325 at March 31, 2021 and December 31, 2020, respectively)	135,153			151,257
Investment securities available-for-sale (amortized cost $239,314 and $221,254, net of allowance for credit losses of $485 and $869 at March 31, 2021 and December 31, 2020, respectively)						Investment securities available-for-sale (amortized cost $239,314 and $221,254, net of allowance for credit losses of $485 and $869 at March 31, 2021 and December 31, 2020, respectively)	238,829			218,640
Investments in equity securities	Investments in equity securities	1,948		2,623		Investments in equity securities	3,524			3,279
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	28,192		28,254		Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	25,571			28,183
Loans held for sale	Loans held for sale	31,082		5,504		Loans held for sale	22,636			37,039
Loans and leases held for investment	Loans and leases held for investment	4,951,809		4,386,836		Loans and leases held for investment	5,415,006			5,306,841
Less: Reserve for credit losses, loans and leases		(86,217)		(35,331)
Less: Allowance for credit losses, loans and leases						Less: Allowance for credit losses, loans and leases	(71,497)			(83,044)
Net loans and leases held for investment	Net loans and leases held for investment	4,865,592		4,351,505		Net loans and leases held for investment	5,343,509			5,223,797
Premises and equipment, net	Premises and equipment, net	55,900		56,676		Premises and equipment, net	55,650			55,636
Operating lease right-of-use assets	Operating lease right-of-use assets	34,148		34,418��		Operating lease right-of-use assets	34,317			34,325
Goodwill	Goodwill	172,559		172,559		Goodwill	172,559			172,559
Other intangibles, net of accumulated amortization	Other intangibles, net of accumulated amortization	9,098		10,284		Other intangibles, net of accumulated amortization	9,225			8,866
Bank owned life insurance	Bank owned life insurance	116,244		114,778		Bank owned life insurance	118,435			117,718
Accrued interest receivable and other assets	Accrued interest receivable and other assets	66,116		40,219		Accrued interest receivable and other assets	69,940			65,339
Total assets	Total assets	$	6,125,312	$	5,380,924	Total assets	$	6,416,665		$	6,336,496
LIABILITIES	LIABILITIES					LIABILITIES
Noninterest-bearing deposits	Noninterest-bearing deposits	$	1,725,819	$	1,279,681	Noninterest-bearing deposits	$	1,857,547		$	1,690,663
Interest-bearing deposits:	Interest-bearing deposits:					Interest-bearing deposits:
Demand deposits	Demand deposits	1,719,052		1,677,682		Demand deposits	2,006,368			2,070,183
Savings deposits	Savings deposits	903,973		796,702		Savings deposits	973,466			918,094
Time deposits	Time deposits	520,485		606,010		Time deposits	474,211			563,775
Total deposits	Total deposits	4,869,329		4,360,075		Total deposits	5,311,592			5,242,715
Short-term borrowings	Short-term borrowings	210,780		18,680		Short-term borrowings	26,676			17,906
Long-term debt	Long-term debt	210,039		150,098		Long-term debt	95,000			110,000
Subordinated notes	Subordinated notes	94,903		94,818		Subordinated notes	173,617			183,515
Operating lease liabilities	Operating lease liabilities	37,427		37,617		Operating lease liabilities	37,737			37,690
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	47,961		44,514		Accrued interest payable and other liabilities	49,588			52,198
Total liabilities	Total liabilities	5,470,439		4,705,802		Total liabilities	5,694,210			5,644,024
SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY					SHAREHOLDERS’ EQUITY
Common stock, $5 par value: 48,000,000 shares authorized at June 30, 2020 and December 31, 2019; 31,556,799 shares issued at June 30, 2020 and December 31, 2019; 29,201,985 and 29,334,629 shares outstanding at June 30, 2020 and December 31, 2019, respectively		157,784		157,784
Common stock, $5 par value: 48,000,000 shares authorized at March 31, 2021 and December 31, 2020; 31,556,799 shares issued at March 31, 2021 and December 31, 2020; 29,379,575 and 29,295,052 shares outstanding at March 31, 2021 and December 31, 2020, respectively						Common stock, $5 par value: 48,000,000 shares authorized at March 31, 2021 and December 31, 2020; 31,556,799 shares issued at March 31, 2021 and December 31, 2020; 29,379,575 and 29,295,052 shares outstanding at March 31, 2021 and December 31, 2020, respectively	157,784			157,784
Additional paid-in capital	Additional paid-in capital	296,028		294,999		Additional paid-in capital	296,177			296,186
Retained earnings	Retained earnings	268,751		288,803		Retained earnings	333,581			306,899
Accumulated other comprehensive loss, net of tax benefit	Accumulated other comprehensive loss, net of tax benefit	(19,807)		(21,730)		Accumulated other comprehensive loss, net of tax benefit	(20,440)			(22,144)
Treasury stock, at cost; 2,354,814 and 2,222,170 shares at June 30, 2020 and December 31, 2019, respectively		(47,883)		(44,734)
Treasury stock, at cost; 2,177,224 and 2,261,747 shares at March 31, 2021 and December 31, 2020, respectively						Treasury stock, at cost; 2,177,224 and 2,261,747 shares at March 31, 2021 and December 31, 2020, respectively	(44,647)			(46,253)
Total shareholders’ equity	Total shareholders’ equity	654,873		675,122		Total shareholders’ equity	722,455			692,472
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	6,125,312	$	5,380,924	Total liabilities and shareholders’ equity	$	6,416,665		$	6,336,496

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

Table of Contents

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


		Three Months Ended						Six Months Ended							Three Months Ended
		June 30,						June 30,							March 31,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2020		2019		2020		2019		(Dollars in thousands, except per share data)	2021		2020
Interest income	Interest income															Interest income
Interest and fees on loans and leases:	Interest and fees on loans and leases:									Interest and fees on loans and leases:
Taxable	Taxable	$	44,757	$	47,151	$	90,318	$	92,833	Taxable	$	47,655	$	45,561
Exempt from federal income taxes	Exempt from federal income taxes	2,380		2,759		5,041		5,442		Exempt from federal income taxes	2,008		2,661
Total interest and fees on loans and leases	Total interest and fees on loans and leases	47,137		49,910		95,359		98,275		Total interest and fees on loans and leases	49,663		48,222
Interest and dividends on investment securities:	Interest and dividends on investment securities:									Interest and dividends on investment securities:
Taxable	Taxable	2,218		2,645		4,923		5,358		Taxable	1,303		2,705
Exempt from federal income taxes	Exempt from federal income taxes	196		401		436		832		Exempt from federal income taxes	87		240
Interest on deposits with other banks	Interest on deposits with other banks	67		569		392		838		Interest on deposits with other banks	56		325
Interest and dividends on other earning assets	Interest and dividends on other earning assets	362		535		889		1,121		Interest and dividends on other earning assets	348		527
Total interest income	Total interest income	49,980		54,060		101,999		106,424		Total interest income	51,457		52,019
Interest expense	Interest expense									Interest expense
Interest on deposits	Interest on deposits	4,372		9,111		11,778		17,314		Interest on deposits	3,400		7,406
Interest on short-term borrowings	Interest on short-term borrowings	122		217		228		855		Interest on short-term borrowings	2		106
Interest on long-term debt and subordinated notes	Interest on long-term debt and subordinated notes	1,968		2,097		4,007		4,097		Interest on long-term debt and subordinated notes	2,641		2,039
Total interest expense	Total interest expense	6,462		11,425		16,013		22,266		Total interest expense	6,043		9,551
Net interest income	Net interest income	43,518		42,635		85,986		84,158		Net interest income	45,414		42,468
Provision for credit losses		23,737		2,073		45,580		4,753
(Reversal of provision) provision for credit losses										(Reversal of provision) provision for credit losses	(11,283)		21,843
Net interest income after provision for credit losses	Net interest income after provision for credit losses	19,781		40,562		40,406		79,405		Net interest income after provision for credit losses	56,697		20,625
Noninterest income	Noninterest income									Noninterest income
Trust fee income	Trust fee income	1,924		2,054		3,814		3,941		Trust fee income	2,034		1,890
Service charges on deposit accounts	Service charges on deposit accounts	890		1,447		2,287		2,882		Service charges on deposit accounts	1,282		1,397
Investment advisory commission and fee income	Investment advisory commission and fee income	3,540		4,055		7,795		7,844		Investment advisory commission and fee income	4,697		4,255
Insurance commission and fee income	Insurance commission and fee income	4,067		3,941		8,799		9,085		Insurance commission and fee income	4,955		4,732
Other service fee income	Other service fee income	1,488		2,590		3,358		4,857		Other service fee income	2,192		1,870
Bank owned life insurance income	Bank owned life insurance income	732		743		1,466		1,695		Bank owned life insurance income	717		734
Net gain on sales of investment securities	Net gain on sales of investment securities	65		7		760		8		Net gain on sales of investment securities	65		695
Net gain on mortgage banking activities	Net gain on mortgage banking activities	3,515		796		6,259		1,279		Net gain on mortgage banking activities	5,938		2,744

Other income	Other income	1,779		723		1,846		1,062		Other income	1,370		67
Total noninterest income	Total noninterest income	18,000		16,356		36,384		32,653		Total noninterest income	23,250		18,384
Noninterest expense	Noninterest expense									Noninterest expense
Salaries, benefits and commissions	Salaries, benefits and commissions	21,700		22,052		45,536		43,598		Salaries, benefits and commissions	24,780		23,836
Net occupancy	Net occupancy	2,478		2,601		5,052		5,212		Net occupancy	2,739		2,574
Equipment	Equipment	923		1,065		1,918		2,055		Equipment	946		995
Data processing	Data processing	2,750		2,627		5,510		5,141		Data processing	3,050		2,760
Professional fees	Professional fees	1,264		1,307		2,581		2,571		Professional fees	1,748		1,317
Marketing and advertising	Marketing and advertising	535		786		937		1,326		Marketing and advertising	280		402
Deposit insurance premiums	Deposit insurance premiums	615		430		1,119		882		Deposit insurance premiums	636		504
Intangible expenses	Intangible expenses	321		417		651		843		Intangible expenses	249		330

Other expense	Other expense	5,374		5,496		11,433		10,715		Other expense	5,112		6,059
Total noninterest expense	Total noninterest expense	35,960		36,781		74,737		72,343		Total noninterest expense	39,540		38,777
Income before income taxes	Income before income taxes	1,821		20,137		2,053		39,715		Income before income taxes	40,407		232
Income tax (benefit) expense		(264)		3,669		(870)		7,168
Income tax expense (benefit)										Income tax expense (benefit)	7,804		(606)
Net income	Net income	$	2,085	$	16,468	$	2,923	$	32,547	Net income	$	32,603	$	838
Net income per share:	Net income per share:									Net income per share:
Basic	Basic	$	0.07	$	0.56	$	0.10	$	1.11	Basic	$	1.11	$	0.03
Diluted	Diluted	0.07		0.56		0.10		1.11		Diluted	1.11		0.03

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

Table of Contents

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended June 30,
(Dollars in thousands) 2020 2019
Before
Tax
Amount Tax
Expense
(Benefit) Net of
Tax
Amount Before
Tax
Amount Tax
Expense
(Benefit) Net of
Tax
Amount
Income $ 1,821 $ (264) $ 2,085 $ 20,137 $ 3,669 $ 16,468
Other comprehensive income:
Net unrealized gains on available-for-sale investment securities:
Net unrealized holding gains arising during the period 7,169 1,504 5,665 2,933 616 2,317
Recovery of provision for credit losses (42) (8) (34) — — —
Less: reclassification adjustment for net gains on sales realized in net income (1) (65) (14) (51) (7) (2) (5)
Total net unrealized gains on available-for-sale investment securities 7,062 1,482 5,580 2,926 614 2,312
Net unrealized gains (losses) on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period (62) (13) (49) (263) (55) (208)
Less: reclassification adjustment for net losses (gains) realized in net income (2) 69 14 55 (14) (3) (11)
Total net unrealized gains (losses) on interest rate swaps used in cash flow hedges 7 1 6 (277) (58) (219)
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3) 297 62 235 294 62 232
Accretion of prior service cost included in net periodic pension costs (3) — — — (46) (10) (36)
Total defined benefit pension plans 297 62 235 248 52 196
Other comprehensive income 7,366 1,545 5,821 2,897 608 2,289
Total comprehensive income $ 9,187 $ 1,281 $ 7,906 $ 23,034 $ 4,277 $ 18,757


	Three Months Ended March 31,
(Dollars in thousands)	2021						2020
	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount		Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
Income	$	40,407	$	7,804	$	32,603	$	232	$	(606)	$	838
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized holding gains (losses) arising during the period	2,194		461		1,733		(4,965)		(1,042)		(3,923)
(Reversal of provision) provision for credit losses	(384)		(81)		(303)		597		125		472
Less: reclassification adjustment for net gains on sales realized in net income (1)	(65)		(14)		(51)		(695)		(146)		(549)

Total net unrealized gains (losses) on available-for-sale investment securities	1,745		366		1,379		(5,063)		(1,063)		(4,000)
Net unrealized gains (losses) on interest rate swaps used in cash flow hedges:
Net unrealized holding gains (losses) arising during the period	6		1		5		(497)		(104)		(393)
Less: reclassification adjustment for net losses realized in net income (2)	76		16		60		29		6		23
Total net unrealized gains (losses) on interest rate swaps used in cash flow hedges	82		17		65		(468)		(98)		(370)
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3)	329		69		260		297		62		235

Total defined benefit pension plans	329		69		260		297		62		235
Other comprehensive income (loss)	2,156		452		1,704		(5,234)		(1,099)		(4,135)
Total comprehensive income (loss)	$	42,563	$	8,256	$	34,307	$	(5,002)	$	(1,705)	$	(3,297)

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

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

(3) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (before tax amount). See Note 8, "Retirement Plans and Other Postretirement Benefits" for additional details.

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

~~Table of Contents~~

Six Months Ended June 30,
(Dollars in thousands) 2020 2019
Before
Tax
Amount Tax
Expense
(Benefit) Net of
Tax
Amount Before
Tax
Amount Tax
Expense
(Benefit) Net of
Tax
Amount
Income $ 2,053 $ (870) $ 2,923 $ 39,715 $ 7,168 $ 32,547
Other comprehensive income (loss):
Net unrealized gains on available-for-sale investment securities:
Net unrealized holding gains arising during the period 2,204 462 1,742 8,053 1,691 6,362
Provision for credit losses 555 117 438 — — —
Less: reclassification adjustment for net gains on sales realized in net income (1) (760) (160) (600) (8) (2) (6)
Total net unrealized gains on available-for-sale investment securities 1,999 419 1,580 8,045 1,689 6,356
Net unrealized losses on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period (559) (118) (441) (431) (91) (340)
Less: reclassification adjustment for net losses (gains) realized in net income (2) 98 21 77 (30) (6) (24)
Total net unrealized losses on interest rate swaps used in cash flow hedges (461) (97) (364) (461) (97) (364)
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3) 594 124 470 588 124 464
Accretion of prior service cost included in net periodic pension costs (3) — — — (91) (19) (72)
Total defined benefit pension plans 594 124 470 497 105 392
Other comprehensive income 2,132 446 1,686 8,081 1,697 6,384
Total comprehensive income (loss) $ 4,185 $ (424) $ 4,609 $ 47,796 $ 8,865 $ 38,931

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

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

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

~~Table of Contents~~

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Total		(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Total
Three Months Ended June 30, 2020
Balance at March 31, 2020		29,164,782	$	157,784	$	295,439	$	272,478	$	(25,628)	$	(48,522)	$	651,551

Three Months Ended March 31, 2021															Three Months Ended March 31, 2021
Balance at December 31, 2020															Balance at December 31, 2020	29,295,052	$	157,784	$	296,186	$	306,899	$	(22,144)	$	(46,253)	$	692,472
Net income	Net income	—	—		—		2,085		—		—		2,085		Net income	—	0		0		32,603		0		0		32,603
Other comprehensive income, net of income tax	Other comprehensive income, net of income tax	—	—		—		—		5,821		—		5,821		Other comprehensive income, net of income tax	—	0		0		0		1,704		0		1,704
Cash dividends declared ($0.20 per share)	Cash dividends declared ($0.20 per share)	—	—		—		(5,811)		—		—		(5,811)		Cash dividends declared ($0.20 per share)	—	0		0		(5,864)		0		0		(5,864)
Stock-based compensation	Stock-based compensation	—	—		651		(1)		—		—		650		Stock-based compensation	—	0		878		(56)		0		0		822
Stock issued under dividend reinvestment and employee stock purchase plans	Stock issued under dividend reinvestment and employee stock purchase plans	38,109	—		(62)		—		—		653		591		Stock issued under dividend reinvestment and employee stock purchase plans	23,311	0		65		(1)		0		545		609
Vesting of restricted stock units, net of shares withheld to cover income taxes															Vesting of restricted stock units, net of shares withheld to cover income taxes	42,619	0		(1,126)		0		0		771		(355)

Exercise of stock options															Exercise of stock options	36,286	0		17		0		0		742		759
Cancellation of performance-based restricted stock awards															Cancellation of performance-based restricted stock awards	(7,199)	0		157		0		0		(157)		0
Purchases of treasury stock	Purchases of treasury stock	(906)	—		—		—		—		(14)		(14)		Purchases of treasury stock	(10,494)	0		0		0		0		(295)		(295)
Balance at June 30, 2020		29,201,985	$	157,784	$	296,028	$	268,751	$	(19,807)	$	(47,883)	$	654,873
Balance at March 31, 2021															Balance at March 31, 2021	29,379,575	$	157,784	$	296,177	$	333,581	$	(20,440)	$	(44,647)	$	722,455

~~Table of Contents~~

(Dollars in thousands, except per share data) Common
Shares
Outstanding Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
(Loss) Income Treasury
Stock Total
Six Months Ended June 30, 2020
Balance at December 31, 2019 29,334,629 $ 157,784 $ 294,999 $ 288,803 $ (21,730) $ (44,734) $ 675,122
Adjustment to initially apply ASU No. 2016-13 for CECL (1) — — — (11,284) 237 — (11,047)
Net income — — — 2,923 — — 2,923
Other comprehensive income, net of income tax — — — — 1,686 — 1,686
Cash dividends declared ($0.40 per share) — — — (11,677) — — (11,677)
Stock-based compensation — — 1,075 (14) — — 1,061
Stock issued under dividend reinvestment and employee stock purchase plans 64,154 — (111) — — 1,274 1,163
Vesting of restricted stock unit awards 17,035 — (346) — — 346 —
Exercise of stock options 5,000 — (7) — — 101 94
Cancellations of performance-based restricted stock awards (14,777) — 418 — — (418) —
Purchases of treasury stock (204,056) — — — — (4,452) (4,452)
Balance at June 30, 2020 29,201,985 $ 157,784 $ 296,028 $ 268,751 $ (19,807) $ (47,883) $ 654,873

~~(1) See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2020" for additional information.~~

(Dollars in thousands, except per share data) Common
Shares
Outstanding Common
Stock Additional
Paid-in
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Treasury
Stock Total
Six Months Ended June 30, 2019
Balance at December 31, 2018 29,270,852 $ 157,784 $ 292,401 $ 248,167 $ (28,416) $ (45,803) $ 624,133
Adjustment to initially apply ASU No. 2016-02 for leases — — — (1,525) — — (1,525)
Adjustment to initially apply ASU No. 2017-12 for derivatives — — — (83) 83 — —
Adjustment to initially apply ASU No. 2017-08 for premium amortization on purchased callable debt securities — — — (39) — — (39)
Net income — — — 32,547 — — 32,547
Other comprehensive income, net of income tax — — — — 6,384 — 6,384
Cash dividends declared ($0.40 per share) — — — (11,711) — — (11,711)
Stock-based compensation — — 1,230 — — — 1,230
Stock issued under dividend reinvestment and employee stock purchase plans 48,183 — 77 1 — 1,057 1,135
Exercise of stock options 39,500 — (102) — — 793 691
Cancellations of performance-based restricted stock awards (17,349) — 341 — — (341) —
Purchases of treasury stock (46,244) — — — — (1,175) (1,175)
Balance at June 30, 2019 29,294,942 $ 157,784 $ 293,947 $ 267,357 $ (21,949) $ (45,469) $ 651,670


(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Three Months Ended March 31, 2020
Balance at December 31, 2020	29,334,629	$	157,784	$	294,999	$	288,803	$	(21,730)	$	(44,734)	$	675,122
Adjustment to initially apply ASU No. 2016-13 for CECL	—	0		0		(11,284)		237		0		(11,047)
Net income	—	0		0		838		0		0		838
Other comprehensive loss, net of income tax benefit	—	0		0		0		(4,135)		0		(4,135)
Cash dividends declared ($0.20 per share)	—	0		0		(5,866)		0		0		(5,866)
Stock-based compensation	—	0		424		(13)		0		0		411
Stock issued under dividend reinvestment and employee stock purchase plans	26,045	0		(49)		0		0		621		572
Vesting of restricted stock units	17,035	0		(346)		0		0		346		0

Exercise of stock options	5,000	0		(7)		0		0		101		94
Cancellations of performance-based restricted stock awards	(14,777)	0		418		0		0		(418)		0
Purchases of treasury stock	(203,150)	0		0		0		0		(4,438)		(4,438)
Balance at March 31, 2020	29,164,782	$	157,784	$	295,439	$	272,478	$	(25,628)	$	(48,522)	$	651,551

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

~~Table of Contents~~

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Six Months Ended June 30,							Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		(Dollars in thousands)	2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	2,923	$	32,547	Net income	$	32,603	$	838
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses		45,580		4,753
(Reversal of provision) provision for credit losses						(Reversal of provision) provision for credit losses	(11,283)		21,843
Depreciation of premises and equipment	Depreciation of premises and equipment	2,448		2,651		Depreciation of premises and equipment	1,173		1,258
Net amortization of investment securities premiums and discounts	Net amortization of investment securities premiums and discounts	977		834		Net amortization of investment securities premiums and discounts	768		383
Net gain on sales of investment securities	Net gain on sales of investment securities	(760)		(8)		Net gain on sales of investment securities	(65)		(695)
Net gain on mortgage banking activities	Net gain on mortgage banking activities	(6,259)		(1,279)		Net gain on mortgage banking activities	(5,938)		(2,744)

Bank owned life insurance income	Bank owned life insurance income	(1,466)		(1,695)		Bank owned life insurance income	(717)		(734)
Stock-based compensation	Stock-based compensation	1,139		1,256		Stock-based compensation	874		435
Intangible expenses	Intangible expenses	651		843		Intangible expenses	249		330
Other adjustments to reconcile net income to cash used in operating activities		(985)		(708)
Other adjustments to reconcile net income to cash (used in) provided by operating activities						Other adjustments to reconcile net income to cash (used in) provided by operating activities	(2,036)		273

Originations of loans held for sale	Originations of loans held for sale	(186,426)		(69,323)		Originations of loans held for sale	(142,877)		(63,730)
Proceeds from the sale of loans held for sale	Proceeds from the sale of loans held for sale	178,995		70,603		Proceeds from the sale of loans held for sale	163,052		58,959
Contributions to pension and other postretirement benefit plans	Contributions to pension and other postretirement benefit plans	(136)		(132)		Contributions to pension and other postretirement benefit plans	(66)		(68)
Increase in accrued interest receivable and other assets	Increase in accrued interest receivable and other assets	(12,160)		(3,921)		Increase in accrued interest receivable and other assets	(5,488)		(2,752)
Increase (decrease) in accrued interest payable and other liabilities		1,062		(4,864)
Decrease in accrued interest payable and other liabilities						Decrease in accrued interest payable and other liabilities	(376)		(2,544)
Net cash provided by operating activities	Net cash provided by operating activities	25,583		31,557		Net cash provided by operating activities	29,873		11,052
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Net capital expenditures		(1,680)		(1,432)
Proceeds from sale of premises and equipment						Proceeds from sale of premises and equipment	0		8
Purchases of premises and equipment						Purchases of premises and equipment	(1,311)		(387)
Proceeds from maturities, calls and principal repayments of securities held-to-maturity	Proceeds from maturities, calls and principal repayments of securities held-to-maturity	32,663		11,054		Proceeds from maturities, calls and principal repayments of securities held-to-maturity	20,197		12,475
Proceeds from maturities, calls and principal repayments of securities available-for-sale	Proceeds from maturities, calls and principal repayments of securities available-for-sale	30,087		27,784		Proceeds from maturities, calls and principal repayments of securities available-for-sale	12,708		12,896
Proceeds from sales of securities available-for-sale	Proceeds from sales of securities available-for-sale	63,565		15,494		Proceeds from sales of securities available-for-sale	1,563		62,276
Purchases of investment securities held-to-maturity	Purchases of investment securities held-to-maturity	(43,116)		(41,808)		Purchases of investment securities held-to-maturity	(4,625)		(43,116)
Purchases of investment securities available-for-sale	Purchases of investment securities available-for-sale	(39,003)		(498)		Purchases of investment securities available-for-sale	(32,540)		(32,242)
Proceeds from sales of money market mutual funds	Proceeds from sales of money market mutual funds	6,912		523		Proceeds from sales of money market mutual funds	2,020		4,753
Purchases of money market mutual funds	Purchases of money market mutual funds	(6,529)		(1,203)		Purchases of money market mutual funds	(2,150)		(4,644)
Net increase (decrease) in other investments		62		(4,418)
Net decrease (increases) in other investments						Net decrease (increases) in other investments	2,612		(211)

Net increase in loans and leases	Net increase in loans and leases	(591,521)		(162,169)		Net increase in loans and leases	(108,296)		(62,368)
Proceeds from sales of other real estate owned		—		599

Net cash used in investing activities	Net cash used in investing activities	(548,560)		(156,074)		Net cash used in investing activities	(109,822)		(50,560)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net increase in deposits	Net increase in deposits	509,253		236,213		Net increase in deposits	68,869		47,229
Net increase (decrease) in short-term borrowings	Net increase (decrease) in short-term borrowings	192,100		(150,418)		Net increase (decrease) in short-term borrowings	8,770		(265)
Proceeds from issuance of long-term debt	Proceeds from issuance of long-term debt	125,000		25,000		Proceeds from issuance of long-term debt	0		125,000
Repayment of long-term debt	Repayment of long-term debt	(65,000)		—		Repayment of long-term debt	(15,000)		(65,000)

Repayment of subordinated debt						Repayment of subordinated debt	(10,000)		0

Payment of contingent consideration on acquisitions	Payment of contingent consideration on acquisitions	(61)		(65)		Payment of contingent consideration on acquisitions	(29)		(31)

Purchases of treasury stock	Purchases of treasury stock	(4,452)		(1,175)		Purchases of treasury stock	(650)		(4,438)
Stock issued under dividend reinvestment and employee stock purchase plans	Stock issued under dividend reinvestment and employee stock purchase plans	1,163		1,135		Stock issued under dividend reinvestment and employee stock purchase plans	609		572
Proceeds from exercise of stock options	Proceeds from exercise of stock options	94		691		Proceeds from exercise of stock options	759		94
Cash dividends paid	Cash dividends paid	(11,719)		(11,717)		Cash dividends paid	(5,920)		(5,879)
Net cash provided by financing activities	Net cash provided by financing activities	746,378		99,664		Net cash provided by financing activities	47,408		97,282
Net increase (decrease) in cash and cash equivalents		223,401		(24,853)
Net (decrease) increase in cash and cash equivalents						Net (decrease) increase in cash and cash equivalents	(32,541)		57,774
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	125,128		109,420		Cash and cash equivalents at beginning of year	219,858		125,128
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	348,529	$	84,567	Cash and cash equivalents at end of period	$	187,317	$	182,902

Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid for interest	Cash paid for interest	$	17,535	$	22,002	Cash paid for interest	$	6,856	$	9,420
Cash paid for income taxes, net of refunds	Cash paid for income taxes, net of refunds	7,977		9,883		Cash paid for income taxes, net of refunds	130		32
Non cash transactions:	Non cash transactions:					Non cash transactions:
Transfer of loans to other real estate owned	Transfer of loans to other real estate owned	$	8,125	$	—	Transfer of loans to other real estate owned	$	126	$	0
Transfer of loans to loans held for sale		14,416		—

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

~~Table of Contents~~

UNIVEST FINANCIAL CORPORATION AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 1. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of Univest Financial Corporation (the Corporation) and its wholly owned subsidiaries. The Corporation’s direct subsidiary is Univest Bank and Trust Co. (the Bank). All significant intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations for interim financial information. The accompanying unaudited consolidated financial statements reflect all adjustments which are of a normal recurring nature and are, in the opinion of management, necessary for a fair presentation of the financial statements for the interim periods presented. Certain prior period amounts have been reclassified to conform to the current-period presentation. Operating results for the three-month ~~or six-month periods~~period ended ~~June 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, ~~2020~~2021 or for any other period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the registrant’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, which was filed with the SEC on February ~~28, 2020.~~26, 2021.

Use of Estimates

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

Accounting Pronouncements Adopted in ~~2020~~

~~In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”~~ and subsequent related updates. This ASU replaces the incurred loss methodology for recognizing credit losses and requires businesses and other organizations to measure the current expected credit losses (CECL) on financial assets measured at amortized cost, including loans and held-to-maturity securities, net investments in leases accounted for under ASC 842, off-balance sheet credit exposures such as unfunded commitments, and other financial instruments. In addition, ASC 326 requires credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down when management does not intend to sell or believes that it is not more likely than not they will be required to sell. This new guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those years for public business entities that are SEC filers, or January 1, 2020 for the Corporation. The results reported for periods beginning after January 1, 2020 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable accounting standards. See Note 1, "Summary of Significant Accounting Polices - Reserve for Loan and Lease Losses" in the Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the SEC on February 28, 2020, for further information on the Corporation's allowance for loan and lease losses methodology under the incurred loss model.

The Corporation adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans and held-to-maturity securities, net investments in leases, available-for-sale debt securities and unfunded commitments. On January 1, 2020, the Corporation recorded a cumulative effect decrease to retained earnings of $11.3 million, net of tax, of which $10.2 million related to loans and net investment in leases, $905 thousand related to unfunded commitments, and $237 thousand related to available-for-sale securities.

The Corporation adopted the provisions of ASC 326 related to financial assets purchased with credit deterioration (PCD) that were previously classified as purchased credit impaired (PCI) and accounted for under ASC 310-30 using the prospective transition approach. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2020, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $84 thousand of the allowance for credit losses (ACL).

~~Table of Contents~~

The Corporation adopted the provisions of ASC 326 related to presenting other-than-temporary impairment on available-for-sale debt securities prior to January 1, 2020 using the prospective transition approach, though no such charges had been recorded on the securities held by the Corporation as of the date of adoption.

~~In April 2019, the FASB issued ASU No. 2019-04,~~ ~~"Codification Improvements to Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Financial Instruments (Topic 825)."~~ The amendments to Topic 326 are the most significant and address how a company considers recoveries and extension options when estimating expected credit losses. The ASU clarifies that a company’s estimate of expected credit losses should include expected recoveries of financial assets, including recoveries of amounts expected to be written off and those previously written off. The ASU also clarifies that a company should consider contractual extension or renewal options that it cannot unconditionally cancel when determining the contractual term over which expected credit losses are measured. This new guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those years for public business entities that are SEC filers, or January 1, 2020 for the Corporation.

The Corporation adopted ASU No. 2019-04 and incorporated the applicable items into the CECL model described as follows. Management addressed the provision in ASU No. 2019-04 related to how a company considers recoveries by performing an analysis to estimate recoveries that could be reasonably expected based on historical experience as described further below. Management addressed the provision in ASU No. 2019-04 related to how a company considers extension options when estimating expected credit losses as described further below. Management reviewed the provision in the ASU No. 2019-04 related to Topics 815 and 825 and determined these amendments did not have a material impact on the Corporation's financial statements.

The Corporation expanded the pooling utilized under the legacy incurred loss method to include additional segmentation based on risk. The impact of the change from the incurred loss model to the current expected credit loss model is detailed below.

January 1, 2020
(Dollars in thousands) Pre-adoption Adoption Impact As Reported
Assets:
ACL on debt securities: available-for-sale:
Corporate bonds $ — $ 300 $ 300
ACL on loans and leases:
Commercial, financial and agricultural 8,759 5,284 14,043
Real estate-commercial 15,750 6,208 21,958
Real estate-construction 2,446 29 2,475
Real estate-residential secured for business purpose 2,622 2,502 5,124
Real estate-residential secured for personal purpose 2,713 (706) 2,007
Real estate-home equity secured for personal purpose 1,076 (364) 712
Loans to individuals 470 104 574
Lease financings 1,311 (135) 1,176
Unallocated 184 — 184
Total ACL on loans and leases 35,331 12,922 48,253
Liabilities:
Reserve for unfunded commitments $420 $1,145 $ 1,565

~~In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement."~~ This ASU applies to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. Disclosures removed by this ASU are the amount and reasons for transfers between Level 1 and Level 2, the policy for timing of transfers between levels and the valuation processes for Level 3 measurements. This ASU modifies certain disclosures relating to investments in certain entities that calculate net asset value, changes in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Corporation adopted this guidance and the related required disclosures prospectively on January 1, 2020.

~~Table of Contents~~

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

~~Recent Accounting Pronouncements Yet to Be Adopted~~2021

In August 2018, the FASB issued ASU No. 2018-14, "Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans." The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit plans or other postretirement plans. Disclosures removed by this ASU include the following: 1) amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year; 2) the amount and timing of plan assets expected to be returned to the employer; and 3) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for postretirement health care benefits. Additional disclosures required by this ASU include: 1) the weighted-average interest crediting rates used in an entity's cash balance pension plans and other similar plans and 2) explanations for reasons for significant changes in the benefit obligation or plan assets. ~~All~~These amendments ~~should~~are to be applied retrospectively. This ASU isbecame effective ~~for fiscal years beginning after December 15, 2020 or~~on January 1, 2021 for the Corporation. The ~~Corporation does not expect the~~ adoption of this ASU ~~will~~did not have a material impact on the Corporation's financial statement disclosures but will result in ~~revised~~the elimination of certain disclosures for retirement plans and other postretirement ~~benefits.~~benefits in the Form 10-K.

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The ASU adds new guidance to simplify accounting for income taxes, changes the accounting for certain income tax transactions and makes minor improvements to the codification. This ASU isbecame effective ~~for fiscal years beginning after December 15, 2020 or~~on January 1, 2021 for the Corporation. The ~~Corporation does not expect the~~ adoption of this ASU ~~will~~did not have a material impact on the Corporation's financial statements.

Recent Accounting Pronouncements Yet to Be Adopted

In January 2020, the FASB issued ASU No. 2020-01, "Investments—Equity Securities (Topic 321): Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815." This ASU 2020-01 clarifies the interactions between ASC 321, ASC 323 and ASC 815 and addresses accounting for the transition into and out of the equity method and measuring certain purchased options and forward contracts to acquire investments. This ASU is effective for fiscal years beginning after December 15, 2021 or January 1, 2022

for the Corporation. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.

In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The guidance allows for companies to: (1) account for certain contract modifications as a continuation of the existing contract without additional analysis; (2) continue hedge accounting when certain critical terms of a hedging relationship change and assess effectiveness in ways that disregard certain potential sources of ineffectiveness; and (3) make a one-time sale and/or transfer of certain debt securities from held-to-maturity to available-for-sale or trading. This ASU is available for adoption effective immediately, or as of January 1, 2020 or any date thereafter for the Corporation, and applies prospectively to contract modifications and hedging relationships. The one-time election to sell and/or transfer debt securities classified as held-to-maturity may be made at any time after March 12, 2020. The Corporation anticipates adopting this ASU and will continue to analyze the provisions of the ASU in connection with ongoing procedures to monitor the work of the Alternative Rates Committee of the FRB and Federal Reserve Bank of New York in identifying an alternative U.S. dollar reference interest rate. It is too early to predict whether a new rate index replacement ~~which we anticipate will be the Secured Overnight Financing Rate (SOFR),~~ and the adoption of the ASU will have a material impact on the Corporation's financial statements.

~~Table of Contents~~In August 2020, the FASB issued ASU No. 2020-06,

~~Investment Securities~~

~~Securities are classified as investment securities held-to-maturity~~"Debt—Debt with Conversion and ~~carried at amortized cost if management has~~Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)." This guidance simplifies the ~~positive intent~~accounting for convertible debt and ~~ability~~convertible preferred stock by removing the requirements to ~~hold~~separately present certain conversion features in equity. In addition, the ~~securities to maturity. Securities purchased with the intention of recognizing short-term profits are placed~~amendments in the ~~trading account~~ASU also simplify the guidance in ASC 815-40 by removing certain criteria that must be satisfied in order to classify a contract as equity, which is expected to decrease the number of freestanding instruments and ~~are carried at fair value. Securities classified~~embedded derivatives accounted for as ~~available-for-sale are those securities that~~assets or liabilities. Finally, the Corporation intends to hold for an indefinite period of time but not necessarily to maturity. Securities available-for-sale are carried at fair value with unrealized gains and losses, net of estimated income taxes, reflected in accumulated other comprehensive income, a separate component of shareholders' equity, and credit losses are recognized in earnings. Any decision to sell a security classified as available-for-sale would be basedamendments revise the guidance on ~~various factors, including interest rates, changes in the maturity or mix~~calculating earnings per share, requiring use of the ~~Corporation's assets~~if-converted method for all convertible instruments and ~~liabilities, liquidity needs, regulatory capital considerations and other factors. Management determines~~require entities to presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. This ASU is effective for fiscal years beginning after December 15, 2021 or January 1, 2022 for the ~~appropriate classification of debt securities at the time of purchase and re-evaluates such designation as of each balance sheet date.~~

Purchase premiums and discounts are recognized in interest income using the interest method over the expected life of the securities except for premiums on callable debt securities which are amortized to the earliest call date. Due to volatility in the financial markets, there is the risk that any future fair value could vary from that disclosed in the accompanying financial statements. Realized gains and losses on the sale of investment securities are recorded on the trade date, determined using the specific identification method and are included in the consolidated statements of income.

Corporation. The Corporation measures expected credit losses on held-to-maturity debt securities, which are comprised of U.S. government agency securities and residential mortgage-backed securities. The Corporation's residential mortgage-backed security holdings are issued by U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses.

Accrued interest receivable on held-to-maturity debt securities totaled $577 thousand at June 30, 2020 and is included within Accrued interest receivable and other assets. This amount is excluded from the estimate of expected credit losses. Held-to-maturity debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When held-to-maturity debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

~~The Corporation measures expected credit losses on available-for-sale debt securities when the~~ Corporation does not ~~intend to sell, or when it is not more likely than not that it~~expect the adoption of this ASU will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Corporation evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Corporation considers the extent to which fair value is less than amortized cost, any changes to the rating of the security byhave a rating agency, and adverse conditions specifically related to the security, among other factors. If this evaluation indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, equal to the amount that the fair value is less than the amortized cost basis. Economic forecast data is utilized to calculate the present value of expected cash flows.The forecast data is obtained via a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

~~The allowance for credit losses on available-for-sale debt securities is included within Investment securities available-for-sale~~material impact on the condensed consolidated balance sheet. Changes in the allowance for credit losses are recorded within Provision for credit losses on the condensed consolidated statement of income. Losses are charged against the allowance when the Corporation believes the collectability of an available-for-sale security is in jeopardy or when either of the criteria regarding intent or requirement to sell is met.

Accrued interest receivable on available-for-sale debt securities totaled $553 thousand at June 30, 2020 and is included within Accrued interest receivable and other assets on the condensed consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interest credited to income is reversed.

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~~Equity securities are measured at fair value with changes in fair value recognized in net income.~~

~~Loans and Leases~~

Loans that the Corporation has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at amortized cost, which is the principal amount, net of deferred fees and costs, and the allowance for credit losses. Lease financings are stated at net investment amount, consisting of the present value of lease payments and unguaranteed residual value, plus initial direct costs. Loan commitments are made to accommodate theCorporation's financial needs of customers. These commitments represent off-balance sheet items that are unfunded. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet financial instruments. Accrual of interest income on loans and leases ceases when collectability of interest and/or principal is questionable. If it is determined that the collection of interest previously accrued is uncertain, such accrual is reversed and charged to current earnings. Loans and leases are considered past due based upon the failure to comply with contractual terms.

statements.

A loan or lease is typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or management has serious doubts about the further collectability of principal or interest, even though the loan or lease is currently performing. When a loan or lease is classified as nonaccrual, the accrual of interest on such a loan or lease is discontinued. A loan or lease may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. When a loan or lease is placed on nonaccrual status, unpaid interest credited to income is reversed and the amortization of the deferred fees and costs is suspended. Interest payments received on nonaccrual loans and leases are either applied against principal or reported as interest income, according to management’s judgment as to the ultimate collectability of principal. Loans and leases are usually restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt.

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

~~Certain loan modifications made during the first and second quarters of 2020 were done in accordance with~~ ~~Section 4013 of the CARES Act~~ ~~and the~~ ~~Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customer Affected by the Coronavirus. Accordingly, these loans and leases were not categorized as troubled debt restructurings.~~

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

~~Loan and Lease Fees~~

Fees collected upon loan or lease origination and certain direct costs of originating loans and leases are deferred and recognized over the contractual lives of the related loans and leases as yield adjustments using the interest method. Upon prepayment or other disposition of the underlying loans and leases before their contractual maturities, any associated unearned fees or unamortized costs are recognized. Initial direct costs, comprised of commissions paid that would not have been incurred if the lease had not been obtained, are deferred and amortized over the life of the contract, and are classified within net interest income on leases.

~~Allowance for Credit Losses on Loans and Leases~~

The allowance for credit losses (ACL) on loans and leases is a valuation account that is used to present the net amount expected to be collected on a loan or lease. The ACL for loans and leases is adjusted through provision for credit losses as a charge against, or credit to, earnings. Loans and leases deemed to be uncollectible are charged against the ACL on loans and leases, and any subsequent recoveries are credited to the ACL. Management evaluates the ACL on a quarterly basis. When changes in the reserve are necessary, an adjustment is made.

Management utilizes a discounted cash flow (DCF) model to calculate the present value of the expected cash flows for pools of loans and leases that share similar risk characteristics and compares the results of this calculation to the amortized cost basis to determine its allowance for credit loss balance.

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Management uses relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts in calculating its ACL. Historical credit loss experience provides the basis for the estimation of expected credit losses. Management determines whether there is a need to make qualitative adjustments to historical loss information by monitoring certain factors including differences in current loan-specific risk characteristics as well as for changes in external or environmental conditions, or other relevant factors.

The contractual term used in projecting the cash flows of a loan is based on the maturity date of a loan, and is adjusted for prepayment or curtailment assumptions which may shorten that contractual time period. Options to extend are considered by management in determining the contractual term.

The key inputs to the DCF model are (1) probability of default, (2) loss given default, (3) prepayment and curtailment rates, (4) reasonable and supportable economic forecasts, (5) forecast reversion period, (6) expected recoveries on charged off loans, and (7) discount rate.

~~Probability of Default (PD)~~

In ~~order~~January 2021, the FASB issued ASU No. 2021-01, which refines the scope of ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting", and clarifies some of its guidance as part of the Board’s monitoring of global reference rate reform activities. The ASU permits entities to ~~incorporate economic factors into forecasting within~~elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the ~~DCF model, management elected~~interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets (the “discounting transition”). This ASU is available for adoption retrospective to ~~use~~March 12, 2020, or prospectively from January 7, 2021, through December 31, 2022, at which time transition is expected to be complete. The Corporation will analyze the ~~Loss Driver method to generate~~potential impact of the ~~PD rate inputs. The Loss Driver method analyzes how one or more economic factors change the default rate using a statistical regression analysis.Management selected economic factors that had strong correlations to historical default rates.~~provisions of this ASU in connection with its ongoing evaluation of ASU No. 2020-04.

~~Loss Given Default (LGD)~~

Management elected to use the Frye Jacobs parameter for determining the LGD input, which is an estimation technique that derives a LGD input from segment specific risk curves that correlates LGD with PD.

~~Prepayment and Curtailment rates~~

~~Prepayment~~Rates: Loan level transaction data is used to calculate a quarterly prepayment rate for each of the most recent four quarters prior to the measurement date. Those quarterly rates are annualized and the average of the annualized rates is used in the DCF calculation for fixed payment or term loans. Rates are calculated for each pool.

Curtailment Rates: Loan level transaction data is used to calculate annual curtailment rates using any available historical loan level data. The average of the historical rates is used in the DCF model for interest only payment or line of credit type loans. Rates are calculated for each pool.

~~Reasonable and Supportable Forecasts~~

The forecast data used in the DCF model is obtained via a subscription to a widely recognized and relied upon company who publishes various forecast scenarios. Management evaluates the various scenarios to determine a reasonable and supportable scenario.

~~Forecast Reversion Period~~

Management uses forecasts to predict how economic factors will perform and has determined to use a four quarter forecast period as well as a four quarter straight-line reversion period to historical averages (also commonly referred to as the mean reversion period).

~~Expected Recoveries on Charged-off Loans~~

Management performs an analysis to estimate recoveries that could be reasonably expected based on historical experience in order to account for expected recoveries on loans that have already been fully charged-off and are not included in the ACL calculation.

~~Table of Contents~~

~~Discount Rate~~

The effective interest rate of the underlying loans and leases of the Corporation serves as the discount rate applied to the expected periodic cash flows. Management adjusts the effective interest rate used to discount expected cash flows to incorporate expected prepayments.

~~Individual Evaluation~~

Management evaluates individual instruments for expected credit losses when those instruments do not share similar risk characteristics with instruments evaluated using a collective (pooled) basis. Instruments will not be included in both collective and individual analyses. Individual analysis will establish a specific reserve for instruments in scope. All loans on nonaccrual status are individually evaluated for a specific reserve.

Management considers a financial asset as collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral, based on management's assessment as of the reporting date.

The allowance for credit losses on loans and leases is included within Reserve for credit losses, loans and leases on the condensed consolidated balance sheet. Changes in the allowance for credit losses on loans and leases are recorded within Provision for credit losses on the condensed consolidated statement of income.

~~Accrued Interest Receivable on Loans and Leases~~

Accrued interest receivable on loans and leases held for investment totaled $13.5 million at June 30, 2020 and is included within Accrued interest receivable and other assets on the condensed consolidated balance sheet. This amount is excluded from the estimate of expected credit losses.

~~Reserve for Unfunded Commitments~~

The Corporation maintains a reserve for off-balance sheet credit exposures such as unfunded commitments that are currently unfunded in categories with historical loss experience. Management calculates funding rates using loan level data history at the portfolio level. The most recent quarter’s (the actual measurement quarter) funding rate is subtracted from the maximum historical funding rate which is then applied to each pool’s total available line of credit. The applicable pool level loss rates for the current quarter is then applied to calculate the reserve for unfunded commitments liability each period.

The reserve for off-balance sheet credit exposures is included within Accrued expenses and other liabilities on the condensed consolidated balance sheet. Changes in the reserve for off-balance sheet credit exposures are recorded within Provision for credit losses on the condensed consolidated statement of income.

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Note 2. Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share. For additional information on the calculation of basic and diluted earnings per share, see Note 1, "Summary of Significant Accounting Policies - Earnings per Share" of the Corporation's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.


		Three Months Ended						Six Months Ended							Three Months Ended
		June 30,						June 30,							March 31,
(Dollars and shares in thousands, except per share data)	(Dollars and shares in thousands, except per share data)	2020		2019		2020		2019		(Dollars and shares in thousands, except per share data)	2021		2020
Numerator:	Numerator:									Numerator:
Net income	Net income	$	2,085	$	16,468	$	2,923	$	32,547	Net income	$	32,603	$	838
Net income allocated to unvested restricted stock awards	Net income allocated to unvested restricted stock awards	(3)		(60)		—		(128)		Net income allocated to unvested restricted stock awards	(37)		0
Net income allocated to common shares	Net income allocated to common shares	$	2,082	$	16,408	$	2,923	$	32,419	Net income allocated to common shares	$	32,566	$	838
Denominator:	Denominator:									Denominator:
Weighted average shares outstanding	Weighted average shares outstanding	29,187		29,288		29,237		29,283		Weighted average shares outstanding	29,329		29,286
Average unvested restricted stock awards	Average unvested restricted stock awards	(38)		(107)		(53)		(119)		Average unvested restricted stock awards	(32)		(68)
Denominator for basic earnings per share—weighted-average shares outstanding	Denominator for basic earnings per share—weighted-average shares outstanding	29,149		29,181		29,184		29,164		Denominator for basic earnings per share—weighted-average shares outstanding	29,297		29,218
Effect of dilutive securities—employee stock options and restricted stock units	Effect of dilutive securities—employee stock options and restricted stock units	15		62		35		59		Effect of dilutive securities—employee stock options and restricted stock units	135		65
Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	29,164		29,243		29,219		29,223		Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	29,432		29,283
Basic earnings per share	Basic earnings per share	$	0.07	$	0.56	$	0.10	$	1.11	Basic earnings per share	$	1.11	$	0.03
Diluted earnings per share	Diluted earnings per share	$	0.07	$	0.56	$	0.10	$	1.11	Diluted earnings per share	$	1.11	$	0.03
Average antidilutive options and restricted stock units excluded from computation of diluted earnings per share	Average antidilutive options and restricted stock units excluded from computation of diluted earnings per share	705		325		451		327		Average antidilutive options and restricted stock units excluded from computation of diluted earnings per share	315		329

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Note 3. Investment Securities

The following table shows the amortized cost, the estimated fair value and the allowance for credit losses of the held-to-maturity securities and available-for-sale securities at ~~June 30, 2020~~March 31, 2021 and ~~the amortized cost and the estimated fair value of the held-to-maturity securities and available-for-sale securities at~~ December 31, ~~2019,~~2020, by contractual maturity within each type:


		At June 30, 2020																				At December 31, 2019									At March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Securities Held-to-Maturity	Securities Held-to-Maturity																			Securities Held-to-Maturity
U.S. government corporations and agencies:	U.S. government corporations and agencies:																			U.S. government corporations and agencies:
Within 1 year																				Within 1 year	$	5,000	$	87	$	0	$	0	$	5,087
After 1 year to 5 years	After 1 year to 5 years	$	6,998	$	226	$	—	$	—	$	7,224	$	6,997	$	66	$	—	$	7,063	After 1 year to 5 years	1,999		51		0		0		2,050
		6,998		226		—		—		7,224		6,997		66		—		7,063			6,999		138		0		0		7,137
Residential mortgage-backed securities:	Residential mortgage-backed securities:																			Residential mortgage-backed securities:
After 5 years to 10 years	After 5 years to 10 years	7,810		337		—		—		8,147		9,083		129		—		9,212		After 5 years to 10 years	5,683		248		0		0		5,931
Over 10 years	Over 10 years	186,895		6,041		—		—		192,936		175,972		2,749		(110)		178,611		Over 10 years	122,471		3,916		(157)		0		126,230
		194,705		6,378		—		—		201,083		185,055		2,878		(110)		187,823			128,154		4,164		(157)		0		132,161

Total	Total	$	201,703	$	6,604	$	—	$	—	$	208,307	$	192,052	$	2,944	$	(110)	$	194,886	Total	$	135,153	$	4,302	$	(157)	$	0	$	139,298
Securities Available-for-Sale	Securities Available-for-Sale																			Securities Available-for-Sale

U.S. government corporations and agencies:
Within 1 year		$	—	$	—	$	—	—		$	—	$	301	$	—	$	(1)	$	300

		—		—		—		—		—		301		—		(1)		300
State and political subdivisions:	State and political subdivisions:																			State and political subdivisions:

After 1 year to 5 years	After 1 year to 5 years	3,644		45		—		—		3,689		4,717		23		—		4,740		After 1 year to 5 years	$	3,562	$	22	$	0	$	0	$	3,584
After 5 years to 10 years	After 5 years to 10 years	17,708		181		—		—		17,889		29,563		292		—		29,855		After 5 years to 10 years	6,602		24		0		0		6,626

		21,352		226		—		—		21,578		34,280		315		—		34,595			10,164		46		0		0		10,210
Residential mortgage-backed securities:	Residential mortgage-backed securities:																			Residential mortgage-backed securities:
Within 1 year		83		4		—		—		87		304		9		—		313

After 1 year to 5 years	After 1 year to 5 years	121		3		—		—		124		611		3		(1)		613		After 1 year to 5 years	287		10		0		0		297
After 5 years to 10 years	After 5 years to 10 years	2,362		86		—		—		2,448		36,893		107		(21)		36,979		After 5 years to 10 years	1,498		58		0		0		1,556
Over 10 years	Over 10 years	75,629		2,184		—		—		77,813		80,630		378		(453)		80,555		Over 10 years	132,250		1,184		(1,896)		0		131,538
		78,195		2,277		—		—		80,472		118,438		497		(475)		118,460			134,035		1,252		(1,896)		0		133,391
Collateralized mortgage obligations:	Collateralized mortgage obligations:																			Collateralized mortgage obligations:

After 5 years to 10 years	After 5 years to 10 years	922		35		—		—		957		2,377		6		(22)		2,361		After 5 years to 10 years	694		20		0		0		714
Over 10 years	Over 10 years	5,123		—		—		—		5,123		—		—		—		—		Over 10 years	3,943		0		0		0		3,943
		6,045		35		—		—		6,080		2,377		6		(22)		2,361			4,637		20		0		0		4,657
Corporate bonds:	Corporate bonds:																			Corporate bonds:
Within 1 year	Within 1 year	1,000		10		—		—		1,010		6,012		1		(4)		6,009		Within 1 year	998		9		0		0		1,007
After 1 year to 5 years	After 1 year to 5 years	29,340		1,246		(32)		(6)		30,548		29,606		596		(61)		30,141		After 1 year to 5 years	29,480		1,239		(56)		(6)		30,657
After 5 years to 10 years	After 5 years to 10 years	40,914		18		(4,257)		(509)		36,166		—		—		—		—		After 5 years to 10 years	60,000		150		(764)		(479)		58,907
Over 10 years		20,000		—		(1,313)		(340)		18,347		60,000		—		(4,942)		55,058

		91,254		1,274		(5,602)		(855)		86,071		95,618		597		(5,007)		91,208			90,478		1,398		(820)		(485)		90,571
Total	Total	$	196,846	$	3,812	$	(5,602)	$	(855)	$	194,201	$	251,014	$	1,415	$	(5,505)	$	246,924	Total	$	239,314	$	2,716	$	(2,716)	$	(485)	$	238,829

~~Gross unrealized gains and losses are recognized in accumulated other comprehensive income (loss) and changes in the allowance for credit loss are recorded in provision for credit loss expense.~~


	At December 31, 2020
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Securities Held-to-Maturity
U.S. government corporations and agencies:
After 1 year to 5 years	$	6,998	$	171	$	0	$	0	$	7,169
	6,998		171		0		0		7,169
Residential mortgage-backed securities:
After 5 years to 10 years	6,325		253		0		0		6,578
Over 10 years	137,934		4,644		0		0		142,578
	144,259		4,897		0		0		149,156




Total	$	151,257	$	5,068	$	0	$	0	$	156,325
Securities Available-for-Sale









State and political subdivisions:

After 1 year to 5 years	3,560		33		0		0		3,593
After 5 years to 10 years	9,881		63		0		0		9,944

	13,441		96		0		0		13,537
Residential mortgage-backed securities:

After 1 year to 5 years	323		10		0		0		333
After 5 years to 10 years	1,664		58		0		0		1,722
Over 10 years	110,018		2,153		(63)		0		112,108
	112,005		2,221		(63)		0		114,163
Collateralized mortgage obligations:

After 5 years to 10 years	754		21		0		0		775
Over 10 years	4,561		0		(15)		0		4,546
	5,315		21		(15)		0		5,321
Corporate bonds:
Within 1 year	499		2		0		0		501
After 1 year to 5 years	29,498		1,440		0		(16)		30,922
After 5 years to 10 years	60,496		3		(5,450)		(853)		54,196

	90,493		1,445		(5,450)		(869)		85,619
Total	$	221,254	$	3,783	$	(5,528)	$	(869)	$	218,640

Expected maturities may differ from contractual maturities because debt issuers may have the right to call or prepay obligations without call or prepayment penalties and mortgage-backed securities typically prepay at a rate faster than contractually due.

Securities with a carrying value of ~~$322.0~~$248.9 million and ~~$340.8~~$249.6 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, were pledged to secure public funds deposits and other contractual obligations. In addition, securities of ~~$34.9~~

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$15.5 million and ~~$12.5~~$32.6 million were pledged to secure credit derivatives and interest rate swaps at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. See Note 11, "Derivative Instruments and Hedging Activities" for additional information.

The following table presents information related to sales of securities available-for-sale during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Six Months Ended June 30,							Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		(Dollars in thousands)	2021		2020
Securities available-for-sale:	Securities available-for-sale:					Securities available-for-sale:
Proceeds from sales	Proceeds from sales	$	63,565	$	15,494	Proceeds from sales	$	1,563	$	62,276
Gross realized gains on sales	Gross realized gains on sales	774		29		Gross realized gains on sales	65		709
Gross realized losses on sales	Gross realized losses on sales	14		21		Gross realized losses on sales	0		14
Tax expense related to net realized gains on sales	Tax expense related to net realized gains on sales	160		2		Tax expense related to net realized gains on sales	14		146

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, there were 0 reportable investments in any single issuer representing more than 10% of shareholders’ equity.

The following table shows the fair value of securities that were in an unrealized loss position for which an allowance for credit losses has not been recorded at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, by the length of time those securities were in a continuous loss position.


		Less than Twelve Months						Twelve Months or Longer								Total					Less than Twelve Months				Twelve Months or Longer		Total
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		(Dollars in thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
At June 30, 2020
At March 31, 2021														At March 31, 2021
Securities Held-to-Maturity														Securities Held-to-Maturity

Residential mortgage-backed securities														Residential mortgage-backed securities	$	4,462	$	(157)	$	0	$	0	$	4,462	$	(157)

Total														Total	$	4,462	$	(157)	$	0	$	0	$	4,462	$	(157)
Securities Available-for-Sale														Securities Available-for-Sale

Residential mortgage-backed securities														Residential mortgage-backed securities	$	77,457	$	(1,895)	$	29	$	(1)	$	77,486	$	(1,896)

Total														Total	$	77,457	$	(1,895)	$	29	$	(1)	$	77,486	$	(1,896)
At December 31, 2020														At December 31, 2020
Securities Held-to-Maturity	Securities Held-to-Maturity													Securities Held-to-Maturity

Total	Total	$	—	$	—	$	—	$	—	$	—	$	—	Total	$	0	$	0	$	0	$	0	$	0	$	0
Securities Available-for-Sale	Securities Available-for-Sale													Securities Available-for-Sale

Residential mortgage-backed securities														Residential mortgage-backed securities	13,677		(62)		31		(1)		13,708		(63)
Collateralized mortgage obligations														Collateralized mortgage obligations	4,545		(15)		0		0		4,545		(15)

Total	Total	$	—	$	—	$	—	$	—	$	—	$	—	Total	$	18,222	$	(77)	$	31	$	(1)	$	18,253	$	(78)
At December 31, 2019
Securities Held-to-Maturity

Residential mortgage-backed securities		$	26,767	$	(110)	$	—	$	—	$	26,767	$	(110)

Total		$	26,767	$	(110)	$	—	$	—	$	26,767	$	(110)
Securities Available-for-Sale

U.S. government corporations and agencies		$	—	$	—	$	300	$	(1)	$	300	$	(1)

Residential mortgage-backed securities		21,827		(62)		48,672		(413)		70,499		(475)
Collateralized mortgage obligations		—		—		1,295		(22)		1,295		(22)
Corporate bonds		998		—		65,506		(5,007)		66,504		(5,007)
Total		$	22,825	$	(62)	$	115,773	$	(5,443)	$	138,598	$	(5,505)

At ~~June 30, 2020, no available-for-sale~~March 31, 2021, the fair value of held-to-maturity securities ~~held by the Corporation were~~ in an unrealized loss position for which an allowance for credit losses has not been ~~recorded. The Corporation did not recognize any other-than-temporary impairment charges for the six months ended June 30, 2019.~~

~~At June 30, 2020, no held-to-maturity~~recorded was $4.5 million, including unrealized losses of $157 thousand. These holdings were comprised of two federal agency mortgage-backed securities, ~~held~~which are U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the ~~Corporation were in an unrealized loss position.~~U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The Corporation did not recognize any credit losses on held-to-maturity debt securities for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 or ~~other-than-temporary impairment charges~~March 31, 2020. Accrued interest receivable on held-to-maturity debt securities totaled $357 thousand at March 31, 2021 and is included within Accrued interest receivable and other assets on the condensed consolidated balance sheet. This amount is excluded from the estimate of expected credit losses.

At March 31, 2021, the fair value of available-for-sale securities in an unrealized loss position for which an allowance for credit losses has not been recorded was $77.5 million, including unrealized losses of $1.9 million. These holdings were comprised of 16 federal agency mortgage-backed securities, which are U.S. government entities and agencies and are either explicitly or implicitly guaranteed by the ~~six months ended June 30, 2019.~~U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The Corporation does not intend to sell the securities in an unrealized loss position and is unlikely to be required to sell these securities before a recovery of fair value, which may be maturity. The Corporation concluded that the decline in fair value of these securities was not indicative of a credit loss. Accrued interest receivable on available-for-sale debt securities totaled $602 thousand at March 31, 2021 and is included within Accrued interest receivable and other assets on the condensed consolidated balance sheet. This amount is excluded from the estimate of expected credit losses.

1812

~~Table of Contents~~

The table below presents a rollforward by major security type for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 of the allowance for credit losses on securities available-for-sale.


(Dollars in thousands)	Corporate Bonds
Three months ended ~~June 30, 2020~~March 31, 2021
Securities Available-for-Sale
Beginning balance	$	~~(897)~~(869)

Additions for securities for which no previous expected credit losses were recognized	(19)
Change in securities for which a previous expected credit loss was recognized	42403
Ending balance	$	~~(855)~~(485)

~~Six~~Three months ended ~~June 30,~~March 31, 2020
Securities Available-for-Sale
Beginning balance	$	—0
Adjustment to initially apply ASU No. 2016-13 for CECL	(300)
Additions for securities for which no previous expected credit losses were recognized	(25)
Change in securities for which a previous expected credit loss was recognized	~~(555)~~(572)
Ending balance	$	~~(855)~~(897)

At ~~June 30, 2020,~~March 31, 2021, the fair value of available-for-sale securities in an unrealized loss position for which an allowance for credit losses has been recorded was ~~$59.0~~$52.6 million, including unrealized losses of ~~$5.6 million,~~$820 thousand, and allowance for credit losses of ~~$855~~$485 thousand. ~~These holdings were in an unrealized loss position for a period of greater than twelve months.~~ These holdings were comprised of 813 investment grade corporate bonds which fluctuate in value based on changes in market ~~conditions, which for~~conditions. For these ~~underlying~~ securities, ~~was~~fluctuations were primarily due to changes in the interest rate environment. The Corporation does not have the intent to sell these securities and it is not likely that it will be required to sell the securities before their anticipated recovery. The underlying issuers continue to make timely principal and interest payments on the securities. The ~~Corporation concluded that a portion~~reversal of ~~decline in~~ the ~~value of these securities was indicative of a credit loss. The Corporation recorded a~~ provision for credit losses of ~~$555~~$403 thousand ~~on these available-for-sale debt securities~~ for the ~~six~~three months ended ~~June 30, 2020. The Corporation did not record any other-than-temporary impairment charges for~~March 31, 2021 was primarily related to the improvement in fair value of six ~~months ended June 30, 2019.~~underlying securities that are tied to the 10-year swap curve which had significantly steepened during the quarter.

The Corporation recognized a ~~$292~~$115 thousand net ~~loss~~gain and ~~$33~~a $268 thousand net ~~gain~~loss on equity securities during the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively, in other noninterest income. There were 0 sales of equity securities during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 or ~~June 30, 2019.~~March 31, 2020.

Note 4. Loans and Leases

Summary of Major Loan and Lease Categories


(Dollars in thousands)	(Dollars in thousands)	At June 30, 2020		At December 31, 2019		(Dollars in thousands)	At March 31, 2021		At December 31, 2020
Commercial, financial and agricultural	Commercial, financial and agricultural	$	822,733	$	947,029	Commercial, financial and agricultural	$	871,996	$	892,665
Paycheck Protection Program	Paycheck Protection Program	498,978		—		Paycheck Protection Program	528,452		483,773
Real estate-commercial	Real estate-commercial	2,222,490		2,040,441		Real estate-commercial	2,531,700		2,458,872
Real estate-construction	Real estate-construction	212,534		232,595		Real estate-construction	249,652		243,355
Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	376,050		373,973		Real estate-residential secured for business purpose	387,801		381,446
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	462,512		439,059		Real estate-residential secured for personal purpose	494,349		487,600
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	173,041		174,435		Real estate-home equity secured for personal purpose	162,529		166,609
Loans to individuals	Loans to individuals	29,222		29,883		Loans to individuals	25,468		27,482
Lease financings	Lease financings	154,249		149,421		Lease financings	163,059		165,039
Total loans and leases held for investment, net of deferred income	Total loans and leases held for investment, net of deferred income	$	4,951,809	$	4,386,836	Total loans and leases held for investment, net of deferred income	$	5,415,006	$	5,306,841
Less: Allowance for credit losses, loans and leases						Less: Allowance for credit losses, loans and leases	(71,497)		(83,044)
Net loans and leases held for investment						Net loans and leases held for investment	$	5,343,509	$	5,223,797
Imputed interest on lease financings, included in the above table	Imputed interest on lease financings, included in the above table	$	(16,678)	$	(16,340)	Imputed interest on lease financings, included in the above table	$	(17,283)	$	(17,670)
Net deferred (fees) costs, included in the above table		(5,550)		5,999
Net deferred fees, included in the above table						Net deferred fees, included in the above table	(4,967)		(2,903)
Overdraft deposits included in the above table	Overdraft deposits included in the above table	401		407		Overdraft deposits included in the above table	4,705		948

1913

~~Table of Contents~~

Age Analysis of Past Due Loans and Leases

The following presents, by class of loans and leases, an aging of past due loans and leases, loans and leases which are current and nonaccrual loans and leases at ~~June 30,~~March 31, 2021 and December 31, 2020:


		Accruing Loans and Leases																											Accruing Loans and Leases
(Dollars in thousands)	(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases Held for Investment		(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases Held for Investment
At June 30, 2020
At March 31, 2021																		At March 31, 2021
Commercial, financial and agricultural	Commercial, financial and agricultural	$	9,995	$	456	$	309	$	10,760	$	807,765	$	818,525	$	4,208	$	822,733	Commercial, financial and agricultural	$	1,195	$	0	$	40	$	1,235	$	868,755	$	869,990	$	2,006	$	871,996
Paycheck Protection Program	Paycheck Protection Program	—		—		—		—		498,978		498,978		—		498,978		Paycheck Protection Program	0		0		0		0		528,452		528,452		0		528,452
Real estate—commercial real estate and construction:	Real estate—commercial real estate and construction:																	Real estate—commercial real estate and construction:
Commercial real estate	Commercial real estate	8,006		6,532		54		14,592		2,190,330		2,204,922		17,568		2,222,490		Commercial real estate	3,893		88		0		3,981		2,505,693		2,509,674		22,026		2,531,700
Construction	Construction	9,272		1,203		—		10,475		202,059		212,534		—		212,534		Construction	1,164		0		0		1,164		248,488		249,652		0		249,652
Real estate—residential and home equity:	Real estate—residential and home equity:																	Real estate—residential and home equity:
Residential secured for business purpose	Residential secured for business purpose	1,633		1,291		468		3,392		370,904		374,296		1,754		376,050		Residential secured for business purpose	2,364		660		0		3,024		381,918		384,942		2,859		387,801
Residential secured for personal purpose	Residential secured for personal purpose	3,203		174		—		3,377		457,867		461,244		1,268		462,512		Residential secured for personal purpose	1,014		0		403		1,417		491,065		492,482		1,867		494,349
Home equity secured for personal purpose	Home equity secured for personal purpose	921		393		—		1,314		170,750		172,064		977		173,041		Home equity secured for personal purpose	682		132		0		814		160,626		161,440		1,089		162,529
Loans to individuals	Loans to individuals	92		127		93		312		28,910		29,222		—		29,222		Loans to individuals	73		33		123		229		25,239		25,468		0		25,468
Lease financings	Lease financings	640		370		269		1,279		152,604		153,883		366		154,249		Lease financings	290		324		98		712		162,198		162,910		149		163,059
Total	Total	$	33,762	$	10,546	$	1,193	$	45,501	$	4,880,167	$	4,925,668	$	26,141	$	4,951,809	Total	$	10,675	$	1,237	$	664	$	12,576	$	5,372,434	$	5,385,010	$	29,996	$	5,415,006

The following presents, by class of loans and leases, an aging of past due loans and leases, loans and leases which are current, acquired credit impaired loans and nonaccrual loans and leases at December 31, 2019:


		Accruing Loans and Leases																													Accruing Loans and Leases
(Dollars in thousands)	(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Acquired Credit Impaired		Nonaccrual Loans and Leases		Total Loans and Leases Held for Investment		(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases Held for Investment
At December 31, 2019
At December 31, 2020																				At December 31, 2020
Commercial, financial and agricultural	Commercial, financial and agricultural	$	2,602	$	150	$	20	$	2,772	$	940,815	$	943,587	$	—	$	3,442	$	947,029	Commercial, financial and agricultural	$	1,104	$	279	$	50	$	1,433	$	888,405	$	889,838	$	2,827	$	892,665
Paycheck Protection Program																				Paycheck Protection Program	0		0		0		0		483,773		483,773		0		483,773
Real estate—commercial real estate and construction:	Real estate—commercial real estate and construction:																			Real estate—commercial real estate and construction:
Commercial real estate	Commercial real estate	3,473		266		—		3,739		2,008,568		2,012,307		206		27,928		2,040,441		Commercial real estate	3,230		859		945		5,034		2,431,099		2,436,133		22,739		2,458,872
Construction	Construction	—		—		—		—		232,338		232,338		—		257		232,595		Construction	361		0		0		361		242,994		243,355		0		243,355
Real estate—residential and home equity:	Real estate—residential and home equity:																			Real estate—residential and home equity:
Residential secured for business purpose	Residential secured for business purpose	2,078		2,442		—		4,520		366,473		370,993		—		2,980		373,973		Residential secured for business purpose	3,726		603		0		4,329		374,331		378,660		2,786		381,446
Residential secured for personal purpose	Residential secured for personal purpose	2,969		446		—		3,415		433,548		436,963		58		2,038		439,059		Residential secured for personal purpose	6,057		80		0		6,137		479,377		485,514		2,086		487,600
Home equity secured for personal purpose	Home equity secured for personal purpose	605		297		—		902		172,106		173,008		—		1,427		174,435		Home equity secured for personal purpose	607		32		0		639		164,923		165,562		1,047		166,609
Loans to individuals	Loans to individuals	157		73		74		304		29,579		29,883		—		—		29,883		Loans to individuals	190		74		185		449		27,033		27,482		0		27,482
Lease financings	Lease financings	1,409		296		49		1,754		147,161		148,915		—		506		149,421		Lease financings	898		291		212		1,401		163,431		164,832		207		165,039
Total	Total	$	13,293	$	3,970	$	143	$	17,406	$	4,330,588	$	4,347,994	$	264	$	38,578	$	4,386,836	Total	$	16,173	$	2,218	$	1,392	$	19,783	$	5,255,366	$	5,275,149	$	31,692	$	5,306,841

2014

~~Table of Contents~~

Nonperforming Loans and Leases

The following presents, by class of loans and leases, nonperforming loans and leases at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.


		At June 30, 2020														At December 31, 2019															At March 31, 2021				At December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases		Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases		(Dollars in thousands)	Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases		Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases

Commercial, financial and agricultural	Commercial, financial and agricultural	$	4,208	$	—	$	309	$	4,517	$	3,442	$	—	$	20	$	3,462	Commercial, financial and agricultural	$	2,006	$	0	$	40	$	2,046	$	2,827	$	0	$	50	$	2,877
Real estate—commercial real estate and construction:	Real estate—commercial real estate and construction:																	Real estate—commercial real estate and construction:
Commercial real estate	Commercial real estate	17,568		—		54		17,622		27,928		—		—		27,928		Commercial real estate	22,026		0		0		22,026		22,739		0		945		23,684
Construction		—		—		—		—		257		—		—		257

Real estate—residential and home equity:	Real estate—residential and home equity:																	Real estate—residential and home equity:
Residential secured for business purpose	Residential secured for business purpose	1,754		—		468		2,222		2,980		—		—		2,980		Residential secured for business purpose	2,859		0		0		2,859		2,786		0		0		2,786
Residential secured for personal purpose	Residential secured for personal purpose	1,268		—		—		1,268		2,038		—		—		2,038		Residential secured for personal purpose	1,867		0		403		2,270		2,086		0		0		2,086
Home equity secured for personal purpose	Home equity secured for personal purpose	977		53		—		1,030		1,427		54		—		1,481		Home equity secured for personal purpose	1,089		52		0		1,141		1,047		53		0		1,100
Loans to individuals	Loans to individuals	—		—		93		93		—		—		74		74		Loans to individuals	0		0		123		123		0		0		185		185
Lease financings	Lease financings	366		—		269		635		506		—		49		555		Lease financings	149		0		98		247		207		0		212		419
Total	Total	$	26,141	$	53	$	1,193	$	27,387	$	38,578	$	54	$	143	$	38,775	Total	$	29,996	$	52	$	664	$	30,712	$	31,692	$	53	$	1,392	$	33,137

*Includes nonaccrual troubled debt restructured loans of $13.5 million and $14.1 million ~~and $13.8 million~~ at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

The following table presents the amortized cost basis of loans and leases on nonaccrual status and loans and leases 90 days or more past due and still accruing as of ~~June 30,~~March 31, 2021 and December 31, 2020.


(Dollars in thousands)	(Dollars in thousands)	Nonaccrual With No ACL		Nonaccrual With ACL		Total Nonaccrual		Loans 90 Days or more Past Due and Accruing Interest		(Dollars in thousands)	Nonaccrual With No ACL		Nonaccrual With ACL		Total Nonaccrual		Loans 90 Days or more Past Due and Accruing Interest
At June 30, 2020
At March 31, 2021										At March 31, 2021
Commercial, financial and agricultural	Commercial, financial and agricultural	$	2,747	$	1,461	$	4,208	$	309	Commercial, financial and agricultural	$	1,647	$	359	$	2,006	$	40
Real estate-commercial	Real estate-commercial	17,342		226		17,568		54		Real estate-commercial	22,026		0		22,026		0

Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	1,723		31		1,754		468		Real estate-residential secured for business purpose	2,832		27		2,859		0
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	706		562		1,268		—		Real estate-residential secured for personal purpose	1,740		127		1,867		403
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	977		—		977		—		Real estate-home equity secured for personal purpose	1,089		0		1,089		0
Loans to individuals	Loans to individuals	—		—		—		93		Loans to individuals	0		0		0		123
Lease financings	Lease financings	—		366		366		269		Lease financings	0		149		149		98
Total	Total	$	23,495	$	2,646	$	26,141	$	1,193	Total	$	29,334	$	662	$	29,996	$	664
At December 31, 2020										At December 31, 2020
Commercial, financial and agricultural										Commercial, financial and agricultural	$	2,187	$	640	$	2,827	$	50
Real estate-commercial										Real estate-commercial	22,739		0		22,739		945

Real estate-residential secured for business purpose										Real estate-residential secured for business purpose	2,663		123		2,786		0
Real estate-residential secured for personal purpose										Real estate-residential secured for personal purpose	1,958		128		2,086		0
Real estate-home equity secured for personal purpose										Real estate-home equity secured for personal purpose	1,047		0		1,047		0
Loans to individuals										Loans to individuals	0		0		0		185
Lease financings										Lease financings	0		207		207		212
Total										Total	$	30,594	$	1,098	$	31,692	$	1,392

~~Table of Contents~~

The following table presents the amortized cost basis of collateral-dependent nonaccrual loans by class of loans and type of collateral as of ~~June 30,~~March 31, 2021 and December 31, 2020.


(Dollars in thousands)	(Dollars in thousands)	Real Estate		Other ⁽¹⁾		None ⁽²⁾		Total		(Dollars in thousands)	Real Estate		Other (1)		None (2)		Total
At June 30, 2020
At March 31, 2021										At March 31, 2021
Commercial, financial and agricultural	Commercial, financial and agricultural	$	1,802	$	1,833	$	573	$	4,208	Commercial, financial and agricultural	$	874	$	1,132	$	0	$	2,006
Real estate-commercial	Real estate-commercial	17,568		—		—		17,568		Real estate-commercial	22,026		0		0		22,026

Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	1,754		—		—		1,754		Real estate-residential secured for business purpose	2,859		0		0		2,859
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	1,268		—		—		1,268		Real estate-residential secured for personal purpose	1,867		0		0		1,867
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	977		—		—		977		Real estate-home equity secured for personal purpose	1,089		0		0		1,089

Total	Total	$	23,369	$	1,833	$	573	$	25,775	Total	$	28,715	$	1,132	$	0	$	29,847
At December 31, 2020										At December 31, 2020
Commercial, financial and agricultural										Commercial, financial and agricultural	$	1,351	$	1,194	$	282	$	2,827
Real estate-commercial										Real estate-commercial	22,739		0		0		22,739

Real estate-residential secured for business purpose										Real estate-residential secured for business purpose	2,786		0		0		2,786
Real estate-residential secured for personal purpose										Real estate-residential secured for personal purpose	2,086		0		0		2,086
Real estate-home equity secured for personal purpose										Real estate-home equity secured for personal purpose	1,047		0		0		1,047

Total										Total	$	30,009	$	1,194	$	282	$	31,485

(1) Collateral consists of business assets, including accounts receivable and personal property.

(2) Loans fully reserved given lack of collateral.

Credit Quality Indicators

The ~~following tables present by class,~~Corporation categorizes risk based on relevant information about the ~~recorded investment in loans and leases held for investment by credit quality indicator at June 30, 2020 and December 31, 2019.~~

~~The Corporation employs a risk rating system related to the credit quality of commercial loans and real estate loans secured for a business purpose. The following is a description~~ability of the ~~internal risk ratings and the likelihood of loss related~~borrower to ~~each risk rating.~~service their debt. Loans with a relationship balance of less than $1 million are reviewed when necessary based on atheir performance, ~~basis, with the primary monitored metrics being delinquency status.~~primarily when such loans are delinquent. Loans with relationships greater than $1 million are reviewed at least annually. Loan relationships with a higher risk profile or classified as special mention or substandard are reviewed at least quarterly. The Corporation reviews credit quality indicators on at least an annual basis and last completed this review in conjunction with the period ended December 31, ~~2019.~~ 2020. The following is a description of the internal risk ratings and the likelihood of loss related to the credit quality of Commercial, financial and agricultural loans, Paycheck Protection Program loans, Real-estate commercial loans, Real-estate construction loans and Real-estate residential secured for a business purpose loans.

1.Pass—Loans considered satisfactory with no indications of deterioration

2.Special Mention—Potential weakness that deserves management's close attention

3.Substandard—Well-defined weakness or weaknesses that jeopardize the liquidation of the debt

4.Doubtful—Collection or liquidation in-full, on the basis of current existing facts, conditions and values, highly questionable and improbable

~~Table of Contents~~

~~Commercial Credit Exposure Credit Risk by Internally Assigned Grades~~

~~The~~Based on the most recent analysis performed, the following ~~tables present by class,~~table presents the recorded investment in loans and leases held for investment for Commercial, financial and agricultural loans, Paycheck Protection Program loans, Real-estate commercial loans, Real-estate construction loans and Real-estate residential secured for a business purpose loans by credit quality indicator at ~~June 30, 2020 under ASC 326.~~March 31, 2021 and December 31, 2020.


		Term Loans Amortized Cost Basis by Origination Year																											Term Loans Amortized Cost Basis by Origination Year
		2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
At June 30, 2020
(Dollars in thousands)																		(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
At March 31, 2021																		At March 31, 2021
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural																	Commercial, Financial and Agricultural
Risk Rating	Risk Rating																	Risk Rating
1. Pass	1. Pass	$	99,875	$	111,696	$	83,979	$	58,363	$	31,043	$	72,877	$	335,029	$	792,862	1. Pass	$	69,723	$	146,523	$	90,985	$	71,413	$	34,561	$	64,820	$	374,556	$	852,581
2. Special Mention	2. Special Mention	3,132		889		1,523		2,614		1,425		1,449		4,755		15,787		2. Special Mention	0		2,680		783		299		408		1,766		6,280		12,216
3. Substandard	3. Substandard	175		945		904		61		—		634		11,365		14,084		3. Substandard	0		0		36		145		17		714		6,287		7,199

Total	Total	$	103,182	$	113,530	$	86,406	$	61,038	$	32,468	$	74,960	$	351,149	$	822,733	Total	$	69,723	$	149,203	$	91,804	$	71,857	$	34,986	$	67,300	$	387,123	$	871,996

Paycheck Protection Plan
Paycheck Protection Program																		Paycheck Protection Program
Risk Rating	Risk Rating																	Risk Rating
1. Pass	1. Pass	$	498,978	$	—	$	—	$	—	$	—	$	—	$	—	$	498,978	1. Pass	$	161,718	$	366,734	$	0	$	0	$	0	$	0	$	0	$	528,452
2. Special Mention	2. Special Mention	—		—		—		—		—		—		—		—		2. Special Mention	0		0		0		0		0		0		0		0
3. Substandard	3. Substandard	—		—		—		—		—		—		—		—		3. Substandard	0		0		0		0		0		0		0		0

Total	Total	$	498,978	$	—	$	—	$	—	$	—	$	—	$	—	$	498,978	Total	$	161,718	$	366,734	$	0	$	0	$	0	$	0	$	0	$	528,452

Real Estate-Commercial	Real Estate-Commercial																	Real Estate-Commercial
Risk Rating	Risk Rating																	Risk Rating
1. Pass	1. Pass	$	514,960	$	545,207	$	313,670	$	318,237	$	184,112	$	254,494	$	45,183	$	2,175,863	1. Pass	$	207,223	$	1,011,644	$	466,297	$	202,198	$	255,578	$	262,380	$	40,041	$	2,445,361
2. Special Mention	2. Special Mention	1,781		12,502		—		1,127		5,177		2,143		288		23,018		2. Special Mention	0		6,173		26,482		3,472		0		6,992		1,248		44,367
3. Substandard	3. Substandard	—		938		1,054		11,070		—		9,759		788		23,609		3. Substandard	0		12,274		4,597		6,647		11,154		6,964		336		41,972

Total	Total	$	516,741	$	558,647	$	314,724	$	330,434	$	189,289	$	266,396	$	46,259	$	2,222,490	Total	$	207,223	$	1,030,091	$	497,376	$	212,317	$	266,732	$	276,336	$	41,625	$	2,531,700

Real Estate-Construction	Real Estate-Construction																	Real Estate-Construction
Risk Rating	Risk Rating																	Risk Rating
1. Pass	1. Pass	$	44,289	$	86,261	$	52,692	$	2,276	$	2,950	$	—	$	3,720	$	192,188	1. Pass	$	28,695	$	100,814	$	56,044	$	34,940	$	124	$	2,949	$	4,821	$	228,387
2. Special Mention	2. Special Mention	20,346		—		—		—		—		—		—		20,346		2. Special Mention	0		21,265		0		0		0		0		0		21,265
3. Substandard	3. Substandard	—		—		—		—		—		—		—		—		3. Substandard	0		0		0		0		0		0		0		0

Total	Total	$	64,635	$	86,261	$	52,692	$	2,276	$	2,950	$	—	$	3,720	$	212,534	Total	$	28,695	$	122,079	$	56,044	$	34,940	$	124	$	2,949	$	4,821	$	249,652

Real Estate-Residential Secured for Business Purpose	Real Estate-Residential Secured for Business Purpose																	Real Estate-Residential Secured for Business Purpose
Risk Rating	Risk Rating																	Risk Rating
1. Pass	1. Pass	$	54,425	$	80,480	$	63,984	$	52,922	$	43,840	$	47,584	$	27,599	$	370,834	1. Pass	$	55,096	$	105,094	$	61,128	$	45,109	$	39,084	$	51,891	$	24,543	$	381,945
2. Special Mention	2. Special Mention	831		468		—		78		734		800		—		2,911		2. Special Mention	0		1,343		0		187		75		304		0		1,909
3. Substandard	3. Substandard	—		463		—		76		763		935		68		2,305		3. Substandard	0		27		985		50		46		2,008		831		3,947

Total	Total	$	55,256	$	81,411	$	63,984	$	53,076	$	45,337	$	49,319	$	27,667	$	376,050	Total	$	55,096	$	106,464	$	62,113	$	45,346	$	39,205	$	54,203	$	25,374	$	387,801

Totals By Risk Rating																		Totals By Risk Rating
1. Pass																		1. Pass	$	522,455	$	1,730,809	$	674,454	$	353,660	$	329,347	$	382,040	$	443,961	$	4,436,726
2. Special Mention																		2. Special Mention	0		31,461		27,265		3,958		483		9,062		7,528		79,757
3. Substandard																		3. Substandard	0		12,301		5,618		6,842		11,217		9,686		7,454		53,118

Total																		Total	$	522,455	$	1,774,571	$	707,337	$	364,460	$	341,047	$	400,788	$	458,943	$	4,569,601


	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
At December 31, 2020
Commercial, Financial and Agricultural
Risk Rating
1. Pass	$	162,547	$	93,967	$	74,722	$	38,906	$	17,371	$	56,053	$	427,336	$	870,902
2. Special Mention	2,723		783		316		500		777		1,144		8,318		14,561
3. Substandard	0		430		362		28		0		627		5,755		7,202

Total	$	165,270	$	95,180	$	75,400	$	39,434	$	18,148	$	57,824	$	441,409	$	892,665

Paycheck Protection Program
Risk Rating
1. Pass	$	483,773	$	0	$	0	$	0	$	0	$	0	$	0	$	483,773
2. Special Mention	0		0		0		0		0		0		0		0
3. Substandard	0		0		0		0		0		0		0		0

Total	$	483,773	$	0	$	0	$	0	$	0	$	0	$	0	$	483,773

Real Estate-Commercial
Risk Rating
1. Pass	$	1,084,157	$	481,997	$	223,646	$	268,236	$	143,041	$	157,503	$	43,008	$	2,401,588
2. Special Mention	6,220		10,076		3,498		0		1,250		5,870		1,247		28,161
3. Substandard	3,803		3,998		709		11,383		1,207		6,690		1,333		29,123

Total	$	1,094,180	$	496,071	$	227,853	$	279,619	$	145,498	$	170,063	$	45,588	$	2,458,872

Real Estate-Construction
Risk Rating
1. Pass	$	116,840	$	59,507	$	39,009	$	113	$	2,950	$	0	$	3,711	$	222,130
2. Special Mention	21,225		0		0		0		0		0		0		21,225
3. Substandard	0		0		0		0		0		0		0		0

Total	$	138,065	$	59,507	$	39,009	$	113	$	2,950	$	0	$	3,711	$	243,355

Real Estate-Residential Secured for Business Purpose
Risk Rating
1. Pass	$	118,925	$	72,149	$	52,775	$	43,347	$	37,768	$	25,170	$	25,510	$	375,644
2. Special Mention	1,354		0		188		77		175		130		0		1,924
3. Substandard	28		991		50		64		1,065		962		718		3,878

Total	$	120,307	$	73,140	$	53,013	$	43,488	$	39,008	$	26,262	$	26,228	$	381,446

Totals By Risk Rating
1. Pass	$	1,966,242	$	707,620	$	390,152	$	350,602	$	201,130	$	238,726	$	499,565	$	4,354,037
2. Special Mention	31,522		10,859		4,002		577		2,202		7,144		9,565		65,871
3. Substandard	3,831		5,419		1,121		11,475		2,272		8,279		7,806		40,203

Total	$	2,001,595	$	723,898	$	395,275	$	362,654	$	205,604	$	254,149	$	516,936	$	4,460,111

The Corporation had no revolving loans which were converted to term loans included within recorded investment in loans and leases held for investment at ~~June 30,~~March 31, 2021 and December 31, 2020. The Corporation had 0 loans with a risk rating of Doubtful included within recorded investment in loans and leases held for investment at ~~June 30,~~March 31, 2021 and December 31, 2020.

2318

~~Table of Contents~~

~~The following tables present by class, the recorded investment in loans and leases held for investment by credit quality indicator at December 31, 2019 under ASC 310.~~

(Dollars in thousands) Commercial,
Financial and
Agricultural Real Estate—
Commercial Real Estate—
Construction Real Estate—
Residential Secured
for Business Purpose Total
At December 31, 2019
Grade:
1. Pass $ 911,848 $ 1,974,561 $ 201,424 $ 367,122 $ 3,454,955
2. Special Mention 18,843 24,199 20,987 3,769 67,798
3. Substandard 16,338 41,681 10,184 3,082 71,285
Total $ 947,029 $ 2,040,441 $ 232,595 $ 373,973 $ 3,594,038

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

The Corporation monitors the credit risk profile by payment activity for the following classifications of loans and leases: Real-estate residential ~~real estate~~secured for personal purpose loans, Real-estate home equity ~~loans~~ secured for a personal purpose ~~and~~ loans, Loans to individuals and ~~lease~~Lease financings. The Corporation reviews credit quality indicators on at least an annual basis and last completed this review in conjunction with the period ended December 31, 2020. Loans and leases past due 90 days or more, loans and leases on nonaccrual status and troubled debt restructured loans and lease modifications are considered nonperforming. Nonperforming loans and leases are reviewed monthly. Performing loans and leases have a nominal to moderate risk of loss. Performing loans and leases are reviewed only if the loan becomes 60 days or more past due. ~~The Corporation reviews credit quality indicators on at least an annual basis and last completed this review in conjunction with the period ended December 31, 2019.~~

~~The~~Based on the most recent analysis performed, the following table presents ~~classification of~~for the recorded investment in loans and leases held for investment for Real-estate residential secured for personal purpose loans, Real-estate home equity secured for personal purpose loans, Loans to individuals and Lease financings by credit quality indicator at ~~June 30,~~March 31, 2021 and December 31, 2020.


		Term Loans Amortized Cost Basis by Origination Year																											Term Loans Amortized Cost Basis by Origination Year
		2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
At June 30, 2020
(Dollars in thousands)																		(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
At March 31, 2021																		At March 31, 2021
Real Estate-Residential Secured for Personal Purpose	Real Estate-Residential Secured for Personal Purpose																	Real Estate-Residential Secured for Personal Purpose
Payment Performance	Payment Performance																	Payment Performance
1. Performing	1. Performing	$	74,240	$	82,989	$	77,421	$	64,408	$	49,501	$	111,067	$	1,618	$	461,244	1. Performing	$	65,849	$	186,428	$	51,724	$	37,244	$	37,472	$	112,249	$	1,113	$	492,079
2. Nonperforming	2. Nonperforming	—		—		57		—		—		1,211		—		1,268		2. Nonperforming	0		1,065		0		55		0		1,150		0		2,270
Total	Total	$	74,240	$	82,989	$	77,478	$	64,408	$	49,501	$	112,278	$	1,618	$	462,512	Total	$	65,849	$	187,493	$	51,724	$	37,299	$	37,472	$	113,399	$	1,113	$	494,349

Real Estate-Home Equity Secured for Personal Purpose	Real Estate-Home Equity Secured for Personal Purpose																	Real Estate-Home Equity Secured for Personal Purpose
Payment Performance	Payment Performance																	Payment Performance
1. Performing	1. Performing	$	387	$	994	$	1,245	$	1,431	$	609	$	2,947	$	164,398	$	172,011	1. Performing	$	311	$	1,061	$	601	$	724	$	1,105	$	2,367	$	155,219	$	161,388
2. Nonperforming	2. Nonperforming	—		—		105		—		—		43		882		1,030		2. Nonperforming	0		0		0		186		0		33		922		1,141
Total	Total	$	387	$	994	$	1,350	$	1,431	$	609	$	2,990	$	165,280	$	173,041	Total	$	311	$	1,061	$	601	$	910	$	1,105	$	2,400	$	156,141	$	162,529

Loans to Individuals	Loans to Individuals																	Loans to Individuals
Payment Performance	Payment Performance																	Payment Performance
1. Performing	1. Performing	$	1,349	$	2,022	$	1,308	$	658	$	396	$	2,560	$	20,836	$	29,129	1. Performing	$	263	$	1,305	$	1,183	$	823	$	342	$	2,180	$	19,249	$	25,345
2. Nonperforming	2. Nonperforming	—		—		—		—		—		78		15		93		2. Nonperforming	0		0		0		0		0		123		0		123
Total	Total	$	1,349	$	2,022	$	1,308	$	658	$	396	$	2,638	$	20,851	$	29,222	Total	$	263	$	1,305	$	1,183	$	823	$	342	$	2,303	$	19,249	$	25,468

Lease Financings	Lease Financings																	Lease Financings
Payment Performance	Payment Performance																	Payment Performance
1. Performing	1. Performing	$	32,754	$	54,928	$	39,881	$	16,981	$	7,441	$	1,629	$	—	$	153,614	1. Performing	$	15,160	$	67,256	$	42,254	$	26,121	$	9,364	$	2,657	$	0	$	162,812
2. Nonperforming	2. Nonperforming	—		102		106		339		66		22		—		635		2. Nonperforming	0		0		23		3		216		5		0		247
Total	Total	$	32,754	$	55,030	$	39,987	$	17,320	$	7,507	$	1,651	$	—	$	154,249	Total	$	15,160	$	67,256	$	42,277	$	26,124	$	9,580	$	2,662	$	0	$	163,059

Totals by Payment Performance																		Totals by Payment Performance
1. Performing																		1. Performing	$	81,583	$	256,050	$	95,762	$	64,912	$	48,283	$	119,453	$	175,581	$	841,624
2. Nonperforming																		2. Nonperforming	0		1,065		23		244		216		1,311		922		3,781
Total																		Total	$	81,583	$	257,115	$	95,785	$	65,156	$	48,499	$	120,764	$	176,503	$	845,405

2419

~~Table of Contents~~

~~The following table presents classifications of loans at December 31, 2019.~~

(Dollars in thousands) Real Estate—
Residential
Secured for
Personal Purpose Real Estate—
Home Equity
Secured for
Personal Purpose Loans to
Individuals Lease
Financings Total
At December 31, 2019
Performing $ 437,021 $ 172,954 $ 29,809 $ 148,866 $ 788,650
Nonperforming 2,038 1,481 74 555 4,148
Total $ 439,059 $ 174,435 $ 29,883 $ 149,421 $ 792,798

~~Reserve~~


	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
At December 31, 2020
Real Estate-Residential Secured for Personal Purpose
Payment Performance
1. Performing	$	191,987	$	61,880	$	56,314	$	50,983	$	38,975	$	84,138	$	1,237	$	485,514
2. Nonperforming	666		0		56		0		0		1,364		0		2,086
Total	$	192,653	$	61,880	$	56,370	$	50,983	$	38,975	$	85,502	$	1,237	$	487,600

Real Estate-Home Equity Secured for Personal Purpose
Payment Performance
1. Performing	$	1,195	$	815	$	829	$	1,160	$	518	$	2,189	$	158,803	$	165,509
2. Nonperforming	0		0		198		0		0		36		866		1,100
Total	$	1,195	$	815	$	1,027	$	1,160	$	518	$	2,225	$	159,669	$	166,609

Loans to Individuals
Payment Performance
1. Performing	$	1,795	$	1,425	$	970	$	441	$	220	$	2,266	$	20,180	$	27,297
2. Nonperforming	0		0		0		0		0		23		162		185
Total	$	1,795	$	1,425	$	970	$	441	$	220	$	2,289	$	20,342	$	27,482

Lease Financings
Payment Performance
1. Performing	$	72,173	$	45,972	$	30,679	$	11,613	$	3,616	$	567	$	0	$	164,620
2. Nonperforming	12		182		5		205		7		8		0		419
Total	$	72,185	$	46,154	$	30,684	$	11,818	$	3,623	$	575	$	0	$	165,039

Totals by Payment Performance
1. Performing	$	267,150	$	110,092	$	88,792	$	64,197	$	43,329	$	89,160	$	180,220	$	842,940
2. Nonperforming	678		182		259		205		7		1,431		1,028		3,790
Total	$	267,828	$	110,274	$	89,051	$	64,402	$	43,336	$	90,591	$	181,248	$	846,730

The Corporation had no revolving loans which were converted to term loans included within recorded investment in loans and leases held for investment at March 31, 2021 and December 31, 2020.

Allowance for Credit Losses on Loans and Leases and Recorded Investment in Loans and Leases

The allowance for credit losses (ACL) on loans decreased during the three months ended March 31, 2021 primarily due to favorable changes in economic assumptions, which were impacted by the ongoing recovery from the COVID-19 pandemic, partially offset by loan growth. There were no changes to the reasonable and supportable forecast period, the reversion period, or any other significant methodology changes during the three months ended March 31, 2021. The following presents, by portfolio segment, a summary of the activity in the ~~reserve~~allowance for credit losses, loans and leases, for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


(Dollars in thousands)	(Dollars in thousands)	Beginning balance		(Recovery of provision) provision for credit losses		Charge-offs		Recoveries		Ending balance		(Dollars in thousands)	Beginning balance		Adjustment to initially apply ASU No. 2016-13 for CECL		(Reversal of provision) provision for credit losses		Charge-offs		Recoveries		Ending balance
Three Months Ended June 30, 2020
Reserve for credit losses, loans and leases:
Three Months Ended March 31, 2021												Three Months Ended March 31, 2021
Allowance for credit losses, loans and leases:												Allowance for credit losses, loans and leases:
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural	$	19,244	$	(2,034)	$	(744)	$	270	$	16,736	Commercial, Financial and Agricultural	$	13,584	$	0	$	(3,078)	$	(338)	$	65	$	10,233
Real Estate-Commercial	Real Estate-Commercial	34,810		18,663		(2,802)		—		50,671		Real Estate-Commercial	52,230		0		(6,771)		0		0		45,459
Real Estate-Construction	Real Estate-Construction	3,117		1,013		—		—		4,130		Real Estate-Construction	3,298		0		(499)		0		0		2,799
Real Estate-Residential Secured for Business Purpose	Real Estate-Residential Secured for Business Purpose	5,906		2,365		(96)		5		8,180		Real Estate-Residential Secured for Business Purpose	7,317		0		(679)		0		54		6,692
Real Estate-Residential Secured for Personal Purpose	Real Estate-Residential Secured for Personal Purpose	2,121		548		—		—		2,669		Real Estate-Residential Secured for Personal Purpose	3,055		0		1		0		0		3,056
Real Estate-Home Equity Secured for Personal Purpose	Real Estate-Home Equity Secured for Personal Purpose	795		273		—		3		1,071		Real Estate-Home Equity Secured for Personal Purpose	1,176		0		79		0		2		1,257
Loans to Individuals	Loans to Individuals	600		239		(93)		25		771		Loans to Individuals	533		0		(58)		(56)		28		447
Lease Financings	Lease Financings	1,473		510		(212)		68		1,839		Lease Financings	1,701		0		(254)		(91)		48		1,404
Unallocated	Unallocated	150		—		N/A		N/A		150		Unallocated	150		0		0		N/A		N/A		150
Total	Total	$	68,216	$	21,577	$	(3,947)	$	371	$	86,217	Total	$	83,044	$	0	$	(11,259)	$	(485)	$	197	$	71,497
Three Months Ended June 30, 2019
Reserve for credit losses, loans and leases:
Three Months Ended March 31, 2020												Three Months Ended March 31, 2020
Allowance for credit losses, loans and leases:												Allowance for credit losses, loans and leases:
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural	$	8,950	$	1,178	$	(1,018)	$	19	$	9,129	Commercial, Financial and Agricultural	$	8,759	$	5,284	$	5,630	$	(481)	$	52	$	19,244
Real Estate-Commercial and Construction		14,981		530		(33)		—		15,478
Real Estate-Commercial												Real Estate-Commercial	15,750		6,208		12,817		0		35		34,810
Real Estate-Construction												Real Estate-Construction	2,446		29		642		0		0		3,117
Real Estate-Residential Secured for Business Purpose	Real Estate-Residential Secured for Business Purpose	2,302		170		—		6		2,478		Real Estate-Residential Secured for Business Purpose	2,622		2,502		782		(3)		3		5,906
Real Estate-Residential and Home Equity Secured for Personal Purpose		3,379		136		(4)		7		3,518
Real Estate-Residential Secured for Personal Purpose												Real Estate-Residential Secured for Personal Purpose	2,713		(706)		114		0		0		2,121
Real Estate-Home Equity Secured for Personal Purpose												Real Estate-Home Equity Secured for Personal Purpose	1,076		(364)		78		0		5		795
Loans to Individuals	Loans to Individuals	469		47		(51)		16		481		Loans to Individuals	470		104		47		(35)		14		600
Lease Financings	Lease Financings	1,275		(14)		(110)		90		1,241		Lease Financings	1,311		(135)		376		(152)		73		1,473
Unallocated	Unallocated	246		29		N/A		N/A		275		Unallocated	184		0		(34)		N/A		N/A		150
Total	Total	$	31,602	$	2,076	$	(1,216)	$	138	$	32,600	Total	$	35,331	$	12,922	$	20,452	$	(671)	$	182	$	68,216

N/A – Not applicable

~~Table of Contents~~

(Dollars in thousands) Beginning balance, prior to adoption of ASU No. 2016-13 for CECL Adjustment to initially apply ASU No. 2016-13 for CECL (Recovery of provision) provision for credit losses Charge-offs Recoveries Ending balance
Six Months Ended June 30, 2020
Reserve for credit losses, loans and leases:
Commercial, Financial and Agricultural $ 8,759 $ 5,284 $ 3,596 $ (1,225) $ 322 $ 16,736
Real Estate-Commercial 15,750 6,208 31,480 (2,802) 35 50,671
Real Estate-Construction 2,446 29 1,655 — — 4,130
Real Estate-Residential Secured for Business Purpose 2,622 2,502 3,147 (99) 8 8,180
Real Estate-Residential Secured for Personal Purpose 2,713 (706) 662 — — 2,669
Real Estate-Home Equity Secured for Personal Purpose 1,076 (364) 351 — 8 1,071
Loans to Individuals 470 104 286 (128) 39 771
Lease Financings 1,311 (135) 886 (364) 141 1,839
Unallocated 184 — (34) N/A N/A 150
Total $ 35,331 $ 12,922 $ 42,029 $ (4,618) $ 553 $ 86,217
Six Months Ended June 30, 2019
Reserve for credit losses, loans and leases:
Commercial, Financial and Agricultural $ 7,983 $ — $ 2,531 $ (1,486) $ 101 $ 9,129
Real Estate-Commercial and Construction 13,903 — 1,558 (74) 91 15,478
Real Estate-Residential Secured for Business Purpose 2,236 — 232 — 10 2,478
Real Estate-Residential and Home Equity Secured for Personal Purpose 3,199 — 322 (15) 12 3,518
Loans to Individuals 484 — 95 (136) 38 481
Lease Financings 1,288 — 19 (214) 148 1,241
Unallocated 271 — 4 N/A N/A 275
Total $ 29,364 $ — $ 4,761 $ (1,925) $ 400 $ 32,600

~~N/A – Not applicable~~

2621

~~Table of Contents~~

The following presents, by portfolio segment, the balance in the ACL on loans and leases, disaggregated on the basis of whether the loan or lease was measured for credit loss as a pooled loan or lease or if it was individually analyzed for a reserve at ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Allowance for credit losses, loans and leases										Loans and leases held for investment															Allowance for credit losses, loans and leases				Loans and leases held for investment
(Dollars in thousands)	(Dollars in thousands)	Ending balance: individually analyzed		Ending balance: pooled		Total ending balance		Ending balance: individually analyzed		Ending balance: pooled		Loans measured at fair value		Total ending balance		(Dollars in thousands)	Ending balance: individually analyzed		Ending balance: pooled		Total ending balance		Ending balance: individually analyzed		Ending balance: pooled		Loans measured at fair value		Total ending balance
At June 30, 2020
At March 31, 2021																At March 31, 2021
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural	$	905	$	15,831	$	16,736	$	4,208	$	818,525	$	—	$	822,733	Commercial, Financial and Agricultural	$	253	$	9,980	$	10,233	$	2,006	$	869,990	$	0	$	871,996
Paycheck Protection Program	Paycheck Protection Program	—		—		—		—		498,978		—		498,978		Paycheck Protection Program	0		0		0		0		528,452		0		528,452
Real Estate-Commercial	Real Estate-Commercial	19		50,652		50,671		17,568		2,204,667		255		2,222,490		Real Estate-Commercial	0		45,459		45,459		22,026		2,509,522		152		2,531,700
Real Estate-Construction	Real Estate-Construction	—		4,130		4,130		—		212,534		—		212,534		Real Estate-Construction	0		2,799		2,799		0		249,652		0		249,652
Real Estate-Residential Secured for Business Purpose	Real Estate-Residential Secured for Business Purpose	1		8,179		8,180		1,754		374,296		—		376,050		Real Estate-Residential Secured for Business Purpose	3		6,689		6,692		2,859		384,942		0		387,801
Real Estate-Residential Secured for Personal Purpose	Real Estate-Residential Secured for Personal Purpose	210		2,459		2,669		1,268		461,244		—		462,512		Real Estate-Residential Secured for Personal Purpose	25		3,031		3,056		1,867		492,482		0		494,349
Real Estate-Home Equity Secured for Personal Purpose	Real Estate-Home Equity Secured for Personal Purpose	—		1,071		1,071		977		172,064		—		173,041		Real Estate-Home Equity Secured for Personal Purpose	0		1,257		1,257		1,089		161,440		0		162,529
Loans to Individuals	Loans to Individuals	—		771		771		—		29,222		—		29,222		Loans to Individuals	0		447		447		0		25,468		0		25,468
Lease Financings	Lease Financings	—		1,839		1,839		—		154,249		—		154,249		Lease Financings	0		1,404		1,404		0		163,059		0		163,059
Unallocated	Unallocated	N/A		150		150		N/A		N/A		N/A		N/A		Unallocated	N/A		150		150		N/A		N/A		N/A		N/A
Total	Total	$	1,135	$	85,082	$	86,217	$	25,775	$	4,925,779	$	255	$	4,951,809	Total	$	281	$	71,216	$	71,497	$	29,847	$	5,385,007	$	152	$	5,415,006
At June 30, 2019
At March 31, 2020																At March 31, 2020
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural	$	99	$	9,030	$	9,129	$	2,150	$	934,999	$	—	$	937,149	Commercial, Financial and Agricultural	$	698	$	18,546	$	19,244	$	3,934	$	940,255	$	0	$	944,189
Real Estate-Commercial and Construction		1,840		13,638		15,478		17,845		2,073,036		1,725		2,092,606
Real Estate-Commercial																Real Estate-Commercial	1,547		33,263		34,810		28,827		2,071,584		288		2,100,699
Real Estate-Construction																Real Estate-Construction	0		3,117		3,117		0		215,150		0		215,150
Real Estate-Residential Secured for Business Purpose	Real Estate-Residential Secured for Business Purpose	165		2,313		2,478		1,596		364,044		—		365,640		Real Estate-Residential Secured for Business Purpose	95		5,811		5,906		1,270		376,374		0		377,644
Real Estate-Residential and Home Equity Secured for Personal Purpose		335		3,183		3,518		3,511		594,226		—		597,737
Real Estate-Residential Secured for Personal Purpose																Real Estate-Residential Secured for Personal Purpose	195		1,926		2,121		1,280		453,718		0		454,998
Real Estate-Home Equity Secured for Personal Purpose																Real Estate-Home Equity Secured for Personal Purpose	0		795		795		820		176,585		0		177,405
Loans to Individuals	Loans to Individuals	—		481		481		—		32,485		—		32,485		Loans to Individuals	0		600		600		0		29,170		0		29,170
Lease Financings	Lease Financings	—		1,241		1,241		—		142,287		—		142,287		Lease Financings	0		1,473		1,473		0		149,570		0		149,570
Unallocated	Unallocated	N/A		275		275		N/A		N/A		N/A		N/A		Unallocated	N/A		150		150		N/A		N/A		N/A		N/A
Total	Total	$	2,439	$	30,161	$	32,600	$	25,102	$	4,141,077	$	1,725	$	4,167,904	Total	$	2,535	$	65,681	$	68,216	$	36,131	$	4,412,406	$	288	$	4,448,825

N/A – Not applicable

~~Table of Contents~~

Troubled Debt Restructured Loans

~~The following presents, by class of loans, information regarding accruing and nonaccrual~~There were no loans that were ~~restructured:~~

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
(Dollars in thousands) Number
of
Loans Pre-
Restructuring
Outstanding
Recorded
Investment Post-
Restructuring
Outstanding
Recorded
Investment Number
of
Loans Pre-
Restructuring
Outstanding
Recorded
Investment Post-
Restructuring
Outstanding
Recorded
Investment
Accruing Troubled Debt Restructured Loans:
Real estate—home equity secured for personal purpose — $ — $ — 1 $ 55 $ 55
Total — $ — $ — 1 $ 55 $ 55
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural 1 $ 619 $ 619 — $ — $ —
Total 1 $ 619 $ 619 — $ — $ —

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
(Dollars in thousands) Number
of
Loans Pre-
Restructuring
Outstanding
Recorded
Investment Post-
Restructuring
Outstanding
Recorded
Investment Number
of
Loans Pre-
Restructuring
Outstanding
Recorded
Investment Post-
Restructuring
Outstanding
Recorded
Investment
Accruing Troubled Debt Restructured Loans:
Real estate—home equity secured for personal purpose — $ — $ — 1 $ 55 $ 55
Total — $ — $ — 1 $ 55 $ 55
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural* 1 $ 619 $ 619 2 $ 956 $ 956
Real estate—commercial real estate* — — — 1 1,313 1,313
Total 1 $ 619 $ 619 3 $ 2,269 $ 2,269

* The three nonaccrual troubled debt restructured ~~loans in the above table totaling $2.3 million were modified via the execution of a forbearance agreement~~ during the ~~six~~three months ended ~~June 30, 2019. These loans relate to one borrower and were on nonaccrual status at the time of modification.~~March 31, 2021 or March 31, 2020.

~~As of June 30, 2020, the~~The Corporation modified ~~approximately 1,420~~certain loans and leases ~~with principal balances totaling $720.1 million~~ via principal and/or interest ~~deferrals. These modifications were done~~deferrals in accordance withSection 4013 of the CARES Act, the Consolidated Appropriations Act, 2021 and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with ~~Customer~~Customers Affected by the Coronavirus~~. Accordingly,~~ and have not categorized these ~~loans and leases were not categorized~~modifications as troubled debt restructurings. These loan and leases had a combined principal balance of approximately $73.0 million as of March 31, 2021, which represents approximately 1.5% of the loan portfolio, excluding PPP loans.

~~Table of Contents~~

~~The following presents, by class of loans, information regarding the types of concessions granted on~~There were no accruing ~~and nonaccrual loans that were restructured during the three and six months ended June 30, 2020 and 2019.~~

Amortization Period Extension
(Dollars in thousands) No. of
Loans Amount
Three Months Ended June 30, 2020
Accruing Troubled Debt Restructured Loans:
Total — $ —
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural 1 $ 619
Total 1 $ 619
Three Months Ended June 30, 2019
Accruing Troubled Debt Restructured Loans:
Real estate—home equity secured for personal purpose 1 $ 55
Total 1 $ 55
Nonaccrual Troubled Debt Restructured Loans:
Total — $ —
Six Months Ended June 30, 2020
Accruing Troubled Debt Restructured Loans:
Total — $ —
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural 1 $ 619
Total 1 $ 619
Six Months Ended June 30, 2019
Accruing Troubled Debt Restructured Loans:
Real estate—home equity secured for personal purpose 1 $ 55
Total 1 $ 55
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural 2 $ 956
Real estate—commercial real estate 1 1,313
Total 3 $ 2,269

~~The following presents, by class of loans, information regarding accruing and~~or nonaccrual troubled debt restructured loans for which there were payment defaults within twelve months of the restructuring ~~date:~~date for the three months ended March 31, 2021 or March 31, 2020.

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
(Dollars in thousands) Number
of Loans Recorded
Investment Number
of Loans Recorded
Investment Number
of Loans Recorded
Investment Number
of Loans Recorded
Investment
Accruing Troubled Debt Restructured Loans:
Total — $ — — $ — — $ — — $ —
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural 1 $ 13 — $ — 1 $ 13 — $ —
Total 1 $ 13 — $ — 1 $ 13 — $ —

2922

~~Table of Contents~~

The following presents ~~by class~~the amount of ~~loans, information regarding~~ consumer mortgages collateralized by residential real estate property that ~~are~~were in the process of foreclosure at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


(Dollars in thousands)	(Dollars in thousands)	At June 30, 2020		At December 31, 2019		(Dollars in thousands)	At March 31, 2021		At December 31, 2020
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	$	64	$	714	Real estate-residential secured for personal purpose	$	57	$	64
Real estate-home equity secured for personal purpose		228		1,058

Total	Total	$	292	$	1,772	Total	$	57	$	64

~~The following presents~~There was no foreclosed residential real estate property included in other real estate owned at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

(Dollars in thousands) At June 30, 2020 At December 31, 2019
Foreclosed residential real estate $ 71 $ 71

Lease Financings

The Corporation, through Univest Capital, Inc., an equipment financing business and a subsidiary of the Bank, provides lease financing to customers primarily in the form of sales-type leases with fixed payment terms and $1.00 buyout clauses. A minor number of contracts are classified as either direct financing leases or operating leases. The fair value of the identified assets within sales-type and direct financing leases are equal to the carrying amount such that there is no profit or loss recorded or deferred upon lease commencement. All receivables related to the equipment financing business are recorded within lease financings.

The following presents the schedule of minimum lease payments receivable:


(Dollars in thousands)	(Dollars in thousands)	At June 30, 2020		At December 31, 2019		(Dollars in thousands)	At March 31, 2021		At December 31, 2020
2020 (excluding the six months ended June 30, 2020)		$	31,551	$	57,515
2021		53,258		45,510
2021 (excluding the three months ended March 31, 2021)						2021 (excluding the three months ended March 31, 2021)	$	47,581	$	61,724
2022	2022	39,827		32,233		2022	53,034		49,970
2023	2023	25,599		18,345		2023	38,736		35,631
2024	2024	12,590		6,639		2024	23,604		20,821
2025						2025	10,937		8,319
Thereafter	Thereafter	4,836		2,259		Thereafter	3,044		2,763
Total future minimum lease payments receivable	Total future minimum lease payments receivable	167,661		162,501		Total future minimum lease payments receivable	176,936		179,228
Plus: Unguaranteed residual	Plus: Unguaranteed residual	927		886		Plus: Unguaranteed residual	938		914
Plus: Initial direct costs	Plus: Initial direct costs	2,339		2,374		Plus: Initial direct costs	2,468		2,567
Less: Imputed interest	Less: Imputed interest	(16,678)		(16,340)		Less: Imputed interest	(17,283)		(17,670)
Lease financings	Lease financings	$	154,249	$	149,421	Lease financings	$	163,059	$	165,039

Note 5. Goodwill and Other Intangible Assets

The Corporation has goodwill from acquisitions which is deemed to be an indefinite intangible asset and is not amortized. The Corporation also has core deposit and customer-related intangibles and servicing rights, which are not deemed to have an indefinite life and therefore will continue to be amortized over their useful life using the present value of projected cash flows. ~~The Corporation also has goodwill which is deemed to be an indefinite intangible asset and is not amortized.~~

Changes in the carrying amount of the Corporation's goodwill by business segment for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 were as follows:


(Dollars in thousands)	(Dollars in thousands)	Banking		Wealth Management		Insurance		Consolidated		(Dollars in thousands)	Banking		Wealth Management		Insurance		Consolidated
Balance at December 31, 2019		$	138,476	$	15,434	$	18,649	$	172,559
Balance at December 31, 2020										Balance at December 31, 2020	$	138,476	$	15,434	$	18,649	$	172,559
Addition to goodwill from acquisitions	Addition to goodwill from acquisitions	—		—		—		—		Addition to goodwill from acquisitions	0		0		0		0
Balance at June 30, 2020		$	138,476	$	15,434	$	18,649	$	172,559
Balance at March 31, 2021										Balance at March 31, 2021	$	138,476	$	15,434	$	18,649	$	172,559

3023

~~Table of Contents~~

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


		At June 30, 2020										At December 31, 2019											At March 31, 2021				At December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization⁽¹⁾		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization (1)		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization (1)		Net Carrying Amount
Amortized intangible assets:	Amortized intangible assets:													Amortized intangible assets:

Core deposit intangibles	Core deposit intangibles	$	6,788	$	4,431	$	2,357	$	6,788	$	4,026	$	2,762	Core deposit intangibles	$	6,788	$	4,960	$	1,829	$	6,788	$	4,787	$	2,001
Customer related intangibles	Customer related intangibles	7,604		6,944		660		8,819		7,923		896		Customer related intangibles	6,017		5,635		381		7,604		7,147		457
Servicing rights	Servicing rights	20,521		14,440		6,081		19,160		12,534		6,626		Servicing rights	23,667		16,652		7,015		22,354		15,946		6,408
Total amortized intangible assets	Total amortized intangible assets	$	34,913	$	25,815	$	9,098	$	34,767	$	24,483	$	10,284	Total amortized intangible assets	$	36,472	$	27,247	$	9,225	$	36,746	$	27,880	$	8,866

(1) ~~Includes~~Included within accumulated amortization is a valuation allowance of ~~$338~~$1 thousand and $87 thousand on mortgage servicing rights at ~~June 30, 2020 within accumulated amortization. There was no valuation allowance as of~~March 31, 2021 and December 31, ~~2019.~~2020, respectively.

The estimated aggregate amortization expense for core deposit and customer-related intangibles for the remainder of ~~2020~~2021 and the succeeding fiscal years is as follows:


Year	Year	(Dollars in thousands)	Amount		Year	(Dollars in thousands)	Amount
Remainder of 2020			$	559
2021			923
Remainder of 2021					Remainder of 2021		$	675
2022	2022		666		2022		666
2023	2023		409		2023		409
2024	2024		267		2024		267
2025					2025		144
Thereafter	Thereafter		193		Thereafter		49
Total					Total		$	2,210

The aggregate fair value of mortgage servicing rights was ~~$6.1~~$9.5 million and ~~$9.2~~$6.7 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The fair value of mortgage servicing rights was determined using a discount rate of 10.0% at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

Changes in the servicing rights balance are summarized as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		2020		2019		(Dollars in thousands)	2021		2020
Beginning of period	Beginning of period	$	6,440	$	6,725	$	6,626	$	6,768	Beginning of period	$	6,408	$	6,626
Servicing rights capitalized	Servicing rights capitalized	835		321		1,361		587		Servicing rights capitalized	1,313		526

Amortization of servicing rights	Amortization of servicing rights	(911)		(426)		(1,568)		(735)		Amortization of servicing rights	(792)		(657)
Changes in valuation allowance	Changes in valuation allowance	(283)		(21)		(338)		(21)		Changes in valuation allowance	86		(55)
End of period	End of period	$	6,081	$	6,599	$	6,081	$	6,599	End of period	$	7,015	$	6,440
Loans serviced for others	Loans serviced for others	$	1,113,819	$	1,042,438	$	1,113,819	$	1,042,438	Loans serviced for others	$	1,255,124	$	1,087,174

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


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		2020		2019		(Dollars in thousands)	2021		2020
Valuation allowance, beginning of period	Valuation allowance, beginning of period	$	(55)	$	—	$	—	$	—	Valuation allowance, beginning of period	$	(87)	$	0
Additions	Additions	(283)		(21)		(338)		(21)		Additions	0		(55)

Reductions										Reductions	86		0

Valuation allowance, end of period	Valuation allowance, end of period	$	(338)	$	(21)	$	(338)	$	(21)	Valuation allowance, end of period	$	(1)	$	(55)

3124

~~Table of Contents~~

The estimated amortization expense of servicing rights for the remainder of ~~2020~~2021 and the succeeding fiscal years is as follows:


Year	Year	(Dollars in thousands)	Amount		Year	(Dollars in thousands)	Amount
Remainder of 2020			$	1,683
2021			1,255
Remainder of 2021					Remainder of 2021		$	1,307
2022	2022		934		2022		1,077
2023	2023		692		2023		885
2024	2024		171		2024		725
2025					2025		593
Thereafter	Thereafter		1,346		Thereafter		2,428
Total					Total		$	7,015

Note 6. Deposits

Deposits and their respective weighted average interest rate at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 consisted of the following:


		At June 30, 2020						At December 31, 2019							At March 31, 2021				At December 31, 2020
		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Amount			Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Amount
		(Dollars in thousands)															(Dollars in thousands)
Noninterest-bearing deposits	Noninterest-bearing deposits	—	%	$	1,725,819	—	%	$	1,279,681	Noninterest-bearing deposits	0	%	$	1,857,547	0	%	$	1,690,663
Demand deposits	Demand deposits	0.21		1,719,052		0.96		1,677,682		Demand deposits	0.19		2,006,368		0.22		2,070,183
Savings deposits	Savings deposits	0.17		903,973		0.37		796,702		Savings deposits	0.09		973,466		0.08		918,094
Time deposits	Time deposits	1.74		520,485		1.95		606,010		Time deposits	1.31		474,211		1.30		563,775
Total	Total	0.29	%	$	4,869,329	0.71	%	$	4,360,075��	Total	0.21	%	$	5,311,592	0.24	%	$	5,242,715

The aggregate amount of time deposits in denominations of $100 thousand or more was ~~$223.9~~$226.3 million at ~~June 30, 2020~~March 31, 2021 and ~~$293.2~~$296.7 million at December 31, ~~2019.~~2020. Deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Deposit insurance per account owner is currently ~~up to~~ $250 thousand. The aggregate amount of time deposits in denominations over $250 thousand was ~~$91.6~~$91.7 million at ~~June 30, 2020~~March 31, 2021 and ~~$143.0~~$161.6 million at December 31, ~~2019.~~2020.

At ~~June 30, 2020,~~March 31, 2021, the scheduled maturities of time deposits are as follows:


Year	Year	(Dollars in thousands)	Amount		Year	(Dollars in thousands)	Amount
Remainder of 2020			$	185,189
2021			146,772
Remainder of 2021					Remainder of 2021		$	11,944
2022	2022		68,015		2022		174,693
2023	2023		92,287		2023		118,952
2024	2024		23,274		2024		124,004
2025					2025		27,477
Thereafter	Thereafter		4,948		Thereafter		17,141
Total	Total		$	520,485	Total		$	474,211

3225

~~Table of Contents~~

Note 7. Borrowings

The following is a summary of borrowings by type. Short-term borrowings consist of overnight borrowings and term borrowings with an original maturity of one year or less.


		At June 30, 2020						At December 31, 2019							At March 31, 2021				At December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Balance at End of Period		Weighted Average Interest Rate at End of Period		Balance at End of Period		Weighted Average Interest Rate at End of Period		(Dollars in thousands)	Balance at End of Period		Weighted Average Interest Rate at End of Period		Balance at End of Period		Weighted Average Interest Rate at End of Period
Short-term borrowings:	Short-term borrowings:									Short-term borrowings:

Customer repurchase agreements	Customer repurchase agreements	$	28,306	0.05	%	$	18,680	0.05	%	Customer repurchase agreements	$	26,676	0.05	%	$	17,906	0.05	%
Other short-term borrowings		182,474		0.35		—		—

Long-term debt:	Long-term debt:									Long-term debt:
FHLB advances	FHLB advances	$	200,000	1.44	%	$	140,000	2.04	%	FHLB advances	$	95,000	1.34	%	$	110,000	1.42	%
Security repurchase agreements		10,039		0.56		10,098		2.07

Subordinated notes	Subordinated notes	$	94,903	5.05	%	$	94,818	5.32	%	Subordinated notes	$	173,617	5.02	%	$	183,515	4.96	%

The Corporation, through the Bank, has a credit facility with the Federal Home Loan Bank (the FHLB) with a maximum borrowing capacity of approximately ~~$2.0~~$2.3 billion. All borrowings and letters of credit from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Bank had outstanding short-term letters of credit with the FHLB totaling ~~$321.9~~$560.7 million and ~~$535.6~~$669.7 million, respectively, which were utilized to collateralize public funds deposits and other secured deposits. The maximum borrowing capacity with the FHLB changes as a function of the Bank’s qualifying collateral assets as well as the FHLB’s internal credit rating of the Bank. The available borrowing capacity from the FHLB totaled ~~$1.5~~$1.6 billion at ~~June 30, 2020.~~

~~The Corporation, through the Bank, maintains uncommitted federal fund credit lines with several correspondent banks that totaled $504.0 million at June 30, 2020 and December~~March 31, ~~2019. Future availability under these lines is subject to the prerogatives of the granting banks and may be withdrawn at will.~~2021.

The Corporation, through the Bank, holds collateral at the Federal Reserve Bank of Philadelphia (the FRB of Philadelphia) ~~in order~~ to provide access to the Discount Window Lending program. The collateral, consisting of investment securities, was valued at ~~$74.3~~$37.7 million and ~~$94.8~~$40.7 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Corporation had 0 outstanding borrowings under ~~this~~the Discount Window Lending program. As part of the CARES Act, the FRB of Philadelphia offered secured discounted borrowings to banks who originated PPP loans through the Paycheck Protection Program Liquidity Facility or PPPLF program. At June 30, 2020, the Bank pledged $182.5 million of PPP loans to the FRB of Philadelphia to borrow $182.5 million of funds at a rate of 0.35%.

The Corporation has a $10.0 million committed line of credit with a correspondent bank. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Corporation had 0 outstanding borrowings under this line.

The Corporation and the Bank have ~~a total of $2.1~~$2.3 billion and ~~$1.9~~$2.2 billion of committed borrowing capacity at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, of which ~~$1.5~~$1.7 billion and ~~$1.2~~$1.5 billion was available as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The Corporation, through the Bank, also ~~has access to $504.0 million of~~maintained uncommitted funding sources from correspondent banks of $460.0 million at March 31, 2021 and December 31, 2020, which were fully ~~available~~available. Future availability under these lines is subject to the prerogatives of the granting banks and may be withdrawn at ~~June 30, 2020 and December 31, 2019.~~will.

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

(Dollars in thousands) As of June 30, 2020 Weighted Average Rate
Remainder of 2020 $ 10,000 1.47 %
2021 45,000 1.93
2022 35,000 1.17
2023 50,000 1.73
2024 60,000 0.98
Thereafter — —
Total $ 200,000 1.44 %

~~Table of Contents~~

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

(Dollars in thousands) As of June 30, 2020 Weighted Average Rate
Remainder of 2020 $ 10,039 0.56 %
2021 — —
2022 — —
2023 — —
2024 — —
Thereafter — —
Total $ 10,039 0.56 %

~~Long-term debt under security repurchase agreements totaling $10.0 million hold variable interest rates and are based on the one-month LIBOR rate plus a spread.~~


(Dollars in thousands)	As of March 31, 2021		Weighted Average Rate
Remainder of 2021	$	0	0	%
2022	0		0
2023	35,000		1.94
2024	60,000		0.98
2025	0		0
Thereafter	0		0
Total	$	95,000	1.34	%

Note 8. Retirement Plans and Other Postretirement Benefits

~~Substantially all employees who were hired before December 8, 2009 are covered by a noncontributory retirement plan. Employees hired on or after December 8, 2009 are not eligible~~Information with respect to ~~participate in~~ the ~~noncontributory retirement plan.~~Retirement Plans and Other Postretirement Benefits follows:


	Three Months Ended March 31,
	2021		2020		2021		2020
(Dollars in thousands)	Retirement Plans				Other Post Retirement Benefits
Service cost	$	130	$	117	$	36	$	28
Interest cost	354		417		21		24
Expected loss on plan assets	(892)		(816)		0		0
Amortization of net actuarial loss	317		291		12		6

Net periodic benefit (income) cost	$	(91)	$	9	$	69	$	58

The Corporation also maintains a non-qualified benefit plan that provides supplemental executive retirement benefits to certain former executives, a portion of which is in excess of limits imposed on qualified plans by federal tax law. This non-qualified benefit plan is not offered to new participants and all current participants are now retired. Information on these plans are aggregated and reported under “Retirement Plans” within this footnote.

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

~~Components of net periodic benefit cost were as follows:~~

Three Months Ended June 30,
2020 2019 2020 2019
(Dollars in thousands) Retirement Plans Other Post Retirement
Benefits
Service cost $ 116 $ 110 $ 27 $ 16
Interest cost 417 476 25 24
Expected return on plan assets (818) (770) — —
Amortization of net actuarial loss 291 294 6 —
Accretion of prior service cost — (46) — —
Net periodic benefit cost $ 6 $ 64 $ 58 $ 40

Six Months Ended June 30,
2020 2019 2020 2019
(Dollars in thousands) Retirement Plans Other Post Retirement
Benefits
Service cost $ 233 $ 219 $ 55 $ 33
Interest cost 834 952 49 47
Expected return on plan assets (1,634) (1,541) — —
Amortization of net actuarial loss 582 588 12 —
Accretion of prior service cost — (91) — —
Net periodic benefit cost $ 15 $ 127 $ 116 $ 80

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

~~Table of Contents~~

The Corporation previously disclosed in its financial statements for the year ended December 31, ~~2019~~2020 that it expected to make contributions of ~~$159~~$156 thousand to its non-qualified retirement plans and ~~$89~~$94 thousand to its other postretirement benefit plans in ~~2020.~~2021. During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, the Corporation contributed ~~$80~~$39 thousand to its non-qualified retirement plans and ~~$56~~$27 thousand to its other postretirement plans. During the ~~six~~three months ended ~~June 30, 2020, $1.3 million~~March 31, 2021, $664 thousand was paid to participants from the retirement plans and ~~$56~~$27 thousand was paid to participants from the other postretirement plans.

Note 9. Stock-Based Incentive Plan

The Corporation ~~has a shareholder approved~~maintains the 2013 Long-Term Incentive Plan, which replaced the expired 2003 Long-Term Incentive Plan. In December 2018, the Corporation's Board of Directors approved an Amended and Restated Univest 2013 Long-Term Incentive Plan (the Plan) to permit the issuance of restricted stock units.

Beginning in 2019, the Corporation issued to directors and employees ~~(“grantees”~~("grantees") restricted stock units rather than restricted stock awards or stock options, which were issued to grantees in prior reporting periods. Restricted stock units differ from restricted stock awards in that Corporation stock is not issued to grantees at the date of the grant and the grantee does not have voting or dividend rights during the vesting period. In the following schedules, issued restricted stock units have been combined with restricted stock awards, as the determination of the value at the grant date and methodology for recording stock-based compensation expense is the same.

The following is a summary of the Corporation's stock option activity and related information for the ~~six~~three months ended ~~June 30, 2020:~~March 31, 2021:

(Dollars in thousands, except per share data) Shares Under Option Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value at June 30, 2020
Outstanding at December 31, 2019 508,111 $ 24.83
Expired (2,000) 28.33
Forfeited (19,018) 24.70
Exercised (5,000) 18.70
Outstanding at June 30, 2020 482,093 24.88 6.2 $ 4
Exercisable at June 30, 2020 428,615 24.43 6.0 4


(Dollars in thousands, except per share data)	Shares Under Option	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value at March 31, 2021
Outstanding at December 31, 2020	453,785	$	25.06


Forfeited	(9,500)	28.33
Exercised	(36,286)	20.90
Outstanding at March 31, 2021	407,999	25.35		5.6	$	1,322
Exercisable at March 31, 2021	407,999	25.35		5.6	1,322

The following is a summary of nonvested stock options at ~~June 30, 2020~~March 31, 2021 including changes during the ~~six~~three months then ended:

(Dollars in thousands, except per share data) Nonvested Stock Options Weighted Average Grant Date Fair Value
Nonvested stock options at December 31, 2019 163,261 $ 6.54
Vested (106,131) 6.58
Forfeited (3,652) 6.50
Nonvested stock options at June 30, 2020 53,478 6.46


(Dollars in thousands, except per share data)	Nonvested Stock Options	Weighted Average Grant Date Fair Value
Nonvested stock options at December 31, 2020	49,771	$	6.46

Vested	(49,771)	6.46

Nonvested stock options at March 31, 2021	0	0

The Corporation did not issue stock options during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 or ~~June 30, 2019.~~March 31, 2020.

The following is a summary of nonvested restricted stock awards and nonvested restricted stock units at ~~June 30, 2020~~March 31, 2021 including changes during the ~~six~~three months then ended:


(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	Nonvested Stock Awards and Units	Weighted Average Grant Date Fair Value		(Dollars in thousands, except per share data)	Nonvested Stock Awards and Units	Weighted Average Grant Date Fair Value
Nonvested stock awards and units at December 31, 2019		209,378	$	26.76
Nonvested stock awards and units at December 31, 2020					Nonvested stock awards and units at December 31, 2020	305,704	$	21.18
Granted	Granted	179,080	18.62		Granted	139,007	27.67
Vested	Vested	(59,855)	27.17		Vested	(85,731)	22.68
Cancelled	Cancelled	(20,993)	27.17		Cancelled	(9,953)	22.35

Nonvested stock awards and units at June 30, 2020		307,610	21.91
Nonvested stock units at March 31, 2021					Nonvested stock units at March 31, 2021	349,027	23.37

~~Table of Contents~~

Certain information regarding restricted stock awards and units is summarized below for the periods indicated:


		Six Months Ended June 30,							Three Months Ended March 31,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2020		2019		(Dollars in thousands, except per share data)	2021		2020
Restricted stock awards and units granted		179,080		113,729
Restricted stock units granted						Restricted stock units granted	139,007		179,080
Weighted average grant date fair value	Weighted average grant date fair value	$	18.62	$	25.66	Weighted average grant date fair value	$	27.67	$	18.62
Intrinsic value of awards granted		$	3,335	$	2,987
Intrinsic value of units granted						Intrinsic value of units granted	$	3,847	$	2,923
Restricted stock awards and units vested	Restricted stock awards and units vested	59,855		32,965		Restricted stock awards and units vested	85,731		57,355
Weighted average grant date fair value	Weighted average grant date fair value	$	27.17	$	21.86	Weighted average grant date fair value	$	22.68	$	27.23
Intrinsic value of awards vested		$	1,375	$	809
Intrinsic value of awards and units vested						Intrinsic value of awards and units vested	$	2,354	$	1,335

The total unrecognized compensation expense and the weighted average period over which unrecognized compensation expense is expected to be recognized related to nonvested ~~stock options and nonvested~~ restricted stock ~~awards and~~ units at ~~June 30, 2020~~March 31, 2021 is presented below:

(Dollars in thousands) Unrecognized Compensation Cost Weighted-Average Period Remaining (Years)
Stock options $ 225 0.7
Restricted stock awards and units 4,688 2.2
$ 4,913 2.1


(Dollars in thousands)	Unrecognized Compensation Cost		Weighted-Average Period Remaining (Years)

Restricted stock units	$	6,925	2.3
	$	6,925	2.3

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


		Six Months Ended June 30,							Three Months Ended March 31,
(Dollars in thousands)	(Dollars in thousands)	2020		2019		(Dollars in thousands)	2021		2020
Stock-based compensation expense:	Stock-based compensation expense:					Stock-based compensation expense:
Stock options	Stock options	$	190	$	378	Stock options	$	62	$	108
Restricted stock awards and units	Restricted stock awards and units	949		878		Restricted stock awards and units	812		327
Employee stock purchase plan	Employee stock purchase plan	44		36		Employee stock purchase plan	23		20
Total	Total	$	1,183	$	1,292	Total	$	897	$	455
Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options	Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options	$	243	$	284	Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options	$	33	$	106

Note 10. Accumulated Other Comprehensive (Loss) Income

The following table shows the components of accumulated other comprehensive (loss) income, net of taxes, for the periods presented:

(Dollars in thousands) Net Unrealized
(Losses) Gains on
Available-for-Sale
Investment
Securities Net Change
Related to
Derivatives Used for Cash Flow Hedges Net Change
Related to
Defined Benefit
Pension Plans Accumulated
Other
Comprehensive
(Loss) Income
Balance, December 31, 2019 $ (3,231) $ (185) $ (18,314) $ (21,730)
Adjustment to initially apply ASU No. 2016-13 for CECL (1) 237 — — 237
Other comprehensive income (loss) 1,580 (364) 470 1,686
Balance, June 30, 2020 $ (1,414) $ (549) $ (17,844) $ (19,807)
Balance, December 31, 2018 $ (11,221) $ 81 $ (17,276) $ (28,416)
Adjustment to initially apply ASU No. 2017-12 for derivatives — 83 — 83
Other comprehensive income (loss) 6,356 (364) 392 6,384
Balance, June 30, 2019 $ (4,865) $ (200) $ (16,884) $ (21,949)

~~(1) See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2020" for additional information.~~


(Dollars in thousands)	Net Unrealized (Losses) Gains on Available-for-Sale Investment Securities		Net Change Related to Derivatives Used for Cash Flow Hedges		Net Change Related to Defined Benefit Pension Plans		Accumulated Other Comprehensive (Loss) Income
Balance, December 31, 2020	$	(1,379)	$	(421)	$	(20,344)	$	(22,144)
Other comprehensive income	1,379		65		260		1,704
Balance, March 31, 2021	$	0	$	(356)	$	(20,084)	$	(20,440)

Balance, December 31, 2019	$	(3,231)	$	(185)	$	(18,314)	$	(21,730)
Adjustment to initially apply ASU No. 2016-13 for CECL	237		0		0		237
Other comprehensive (loss) income	(4,000)		(370)		235		(4,135)
Balance, March 31, 2020	$	(6,994)	$	(555)	$	(18,079)	$	(25,628)

~~Table of Contents~~

Note 11. Derivative Instruments and Hedging Activities

Interest Rate Swaps

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

In 2014, the Corporation entered into an amortizing interest rate swap classified as a cash flow hedge with a notional amount of $20.0 million to hedge a portion of the debt financing of a pool of 10-year fixed rate loans with balances totaling $29.1 million, at time of the hedge, that were originated in 2013. A brokered money market demand account with a balance exceeding the amortizing interest rate swap balance is being used for the cash flow hedge. Under the terms of the swap agreement, the Corporation pays a fixed rate of 2.10% and receives a floating rate of one-month LIBOR. The swap matures in November 2022. The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and on a recurring basis to determine that the derivative has been and is expected to continue to be highly effective in offsetting changes in cash flows of the hedged item. At ~~June 30, 2020,~~March 31, 2021, approximately ~~$238~~$233 thousand in net deferred losses, net of tax, recorded in accumulated other comprehensive loss are expected to be reclassified into earnings during the next twelve months. This amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations, and the addition of other hedges subsequent to ~~June 30, 2020.~~March 31, 2021. At ~~June 30, 2020,~~March 31, 2021, the notional amount of the interest rate swap was ~~$15.9~~$15.3 million and the fair value was a liability of ~~$695~~$450 thousand.

The Corporation has an interest rate swap with a current notional amount of ~~$242~~$147 thousand, for a 15-year fixed rate loan that is earning interest at 7.43%. The Corporation pays a fixed rate of 7.43% and receives a floating rate based on the one-month LIBOR plus 224 basis points. The swap matures in April 2022. The interest rate swap is carried at fair value in accordance with FASB ASC 815 "Derivatives and Hedging." The loan is carried at fair value under the fair value option as permitted by FASB ASC 825 "Financial Instruments."

Credit Derivatives

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

At ~~June 30, 2020,~~March 31, 2021, the Corporation reported ~~NaN~~110 variable-rate to fixed-rate interest rate swap transactions between the third-party financial institution and customers with a current notional amount of ~~$393.4~~$707.3 million and remaining maturities ranging from ~~two years~~12 months to 10 years. At ~~June 30, 2020,~~March 31, 2021, the fair value of the Corporation's interest rate swap credit derivatives was a liability of ~~$912~~$271 thousand. At ~~June 30, 2020,~~March 31, 2021, the fair value of the swaps to the customers was a net liability of ~~$35.1~~$15.5 million and these swaps were in paying positions to the third-party financial institution.

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

Mortgage Banking Derivatives

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

~~Table of Contents~~

Derivatives Tables

The following table presents the notional amounts and fair values of derivatives designated as hedging instruments recorded on the condensed consolidated balance sheets at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. The Corporation pledges cash or securities to cover the negative fair value of derivative instruments. Cash collateral associated with derivative instruments are not added to or netted against the fair value amounts.


				Derivative Assets				Derivative Liabilities								Derivative Assets			Derivative Liabilities
(Dollars in thousands)	(Dollars in thousands)	Notional Amount		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value		(Dollars in thousands)	Notional Amount		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
At June 30, 2020
At March 31, 2021										At March 31, 2021
Interest rate swap - cash flow hedge	Interest rate swap - cash flow hedge	$	15,880		$	—	Other liabilities	$	695	Interest rate swap - cash flow hedge	$	15,255		$	0	Other liabilities	$	450

Total	Total	$	15,880		$	—		$	695	Total	$	15,255		$	0		$	450
At December 31, 2019
At December 31, 2020										At December 31, 2020
Interest rate swap - cash flow hedge	Interest rate swap - cash flow hedge	$	16,286		$	—	Other liabilities	$	235	Interest rate swap - cash flow hedge	$	15,465		$	0	Other liabilities	$	533

Total	Total	$	16,286		$	—		$	235	Total	$	15,465		$	0		$	533

The following table presents the notional amounts and fair values of derivatives not designated as hedging instruments recorded on the condensed consolidated balance sheets at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


				Derivative Assets				Derivative Liabilities								Derivative Assets			Derivative Liabilities
(Dollars in thousands)	(Dollars in thousands)	Notional Amount		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value		(Dollars in thousands)	Notional Amount		Balance Sheet Classification	Fair Value		Balance Sheet Classification	Fair Value
At June 30, 2020
At March 31, 2021										At March 31, 2021
Interest rate swap	Interest rate swap	$	242		$	—	Other liabilities	$	13	Interest rate swap	$	147		$	0	Other liabilities	$	5
Credit derivatives	Credit derivatives	393,444			—		Other liabilities	912		Credit derivatives	707,333			0		Other liabilities	271
Interest rate locks with customers	Interest rate locks with customers	106,956		Other assets	3,453			—		Interest rate locks with customers	97,001		Other assets	1,163			0
Forward loan sale commitments	Forward loan sale commitments	111,649			—		Other liabilities	582		Forward loan sale commitments	119,637		Other assets	1,222			0
Total	Total	$	612,291		$	3,453		$	1,507	Total	$	924,118		$	2,385		$	276
At December 31, 2019
At December 31, 2020										At December 31, 2020
Interest rate swap	Interest rate swap	$	303		$	—	Other liabilities	$	14	Interest rate swap	$	179		$	0	Other liabilities	$	8
Credit derivatives	Credit derivatives	270,147			—		Other liabilities	176		Credit derivatives	643,556			0		Other liabilities	535
Interest rate locks with customers	Interest rate locks with customers	19,966		Other assets	399			—		Interest rate locks with customers	77,246		Other assets	2,894			0
Forward loan sale commitments	Forward loan sale commitments	21,846			—		Other liabilities	19		Forward loan sale commitments	112,690			0		Other liabilities	752
Total	Total	$	312,262		$	399		$	209	Total	$	833,671		$	2,894		$	1,295

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


		Statement of Income Classification	Three Months Ended						Six Months Ended							Statement of Income Classification		Three Months Ended
					June 30,								June 30,					Statement of Income Classification		March 31,
(Dollars in thousands)	(Dollars in thousands)				2020		2019		2020				2019	(Dollars in thousands)	Statement of Income Classification

Interest rate swap—cash flow hedge—net interest payments	Interest rate swap—cash flow hedge—net interest payments	Interest expense	$	69	$	(14)	$	98	$	(30)	Interest rate swap—cash flow hedge—net interest payments	Interest expense				$	29

Interest rate swap—fair value hedge—effectiveness		Interest income	—		—		—		1

Total net (loss) gain			$	(69)	$	14	$	(98)	$	31

Total net loss											Total net loss					$	(76)	$	(29)

~~Table of Contents~~

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


		Statement of Income Classification	Three Months Ended						Six Months Ended								Statement of Income Classification		Three Months Ended
					June 30,								June 30,						Statement of Income Classification	March 31,
(Dollars in thousands)	(Dollars in thousands)				2020		2019		2020				2019	(Dollars in thousands)	Statement of Income Classification

Credit derivatives	Credit derivatives	Other noninterest income	$	1,665	$	318	$	1,805	$	582	Credit derivatives	Other noninterest income					$	140
Interest rate locks with customers	Interest rate locks with customers	Net gain on mortgage banking activities	542		343		3,054		308		Interest rate locks with customers	Net (loss) gain on mortgage banking activities					(1,730)		2,512
Forward loan sale commitments	Forward loan sale commitments	Net gain (loss) on mortgage banking activities	304		(76)		(563)		(47)		Forward loan sale commitments	Net gain (loss) on mortgage banking activities			1,974		(867)
Total net gain	Total net gain		$	2,511	$	585	$	4,296	$	843	Total net gain				$	1,351	$	1,785

The following table presents amounts included in accumulated other comprehensive (loss) income for derivatives designated as hedging instruments at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


(Dollars in thousands)	(Dollars in thousands)	Accumulated Other Comprehensive (Loss) Income	At June 30, 2020		At December 31, 2019		(Dollars in thousands)	Accumulated Other Comprehensive (Loss) Income	At March 31, 2021		At December 31, 2020
Interest rate swap—cash flow hedge	Interest rate swap—cash flow hedge	Fair value, net of taxes	$	(549)	$	(185)	Interest rate swap—cash flow hedge	Fair value, net of taxes	$	(356)	$	(421)
Total	Total		$	(549)	$	(185)	Total		$	(356)	$	(421)

Note 12. Fair Value Disclosures

Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The Corporation determines the fair value of financial instruments based on the fair value hierarchy. The Corporation maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Corporation. Unobservable inputs are inputs that reflect the Corporation’s assumptions that market participants would use in pricing the asset or liability based on the best information available in the circumstances, including assumptions about risk. Three levels of inputs are used to measure fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement. ~~Transfers between levels were recognized at the end of the reporting period for the year ended December 31, 2019.~~

Level 1: Valuations are based on quoted prices in active markets for identical assets or liabilities that the Corporation can access at the measurement date. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2: Valuations are based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3: Valuations are based on inputs that are unobservable and significant to the overall fair value measurement. Assets and liabilities utilizing Level 3 inputs include: financial instruments whose value is determined using pricing models, discounted cash-flow methodologies, or similar techniques, as well as instruments for which the fair value calculation requires significant management judgment or estimation.

Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Investment Securities

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

~~Table of Contents~~

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

On a quarterly basis, the Corporation reviews changes, as submitted by the pricing service, in the market value of its security portfolio. Individual changes in valuations are reviewed for consistency with general interest rate movements and any known credit concerns for specific securities. If, upon the Corporation’s review or in comparing with another service, a material difference between pricing evaluations were to exist, the Corporation may submit an inquiry to the current pricing service regarding the data used to determine the valuation of a particular security. If the Corporation determines there is market information that would support a different valuation than from the current pricing service’s evaluation, the Corporation may utilize and change the security's valuation. There were no material differences in valuations noted at ~~June 30, 2020.~~March 31, 2021.

Loans Held for Sale

The fair value of our loans held for sale is based on estimates using Level 2 inputs. These inputs are based on pricing information obtained from wholesale mortgage banks and brokers and applied to loans with similar interest rates and maturities.

Derivative Financial Instruments

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

One commercial loan associated with an interest rate swap is classified in Level 3 of the valuation hierarchy at ~~June 30, 2020~~March 31, 2021 since lending credit risk is not an observable input for this loan. The unrealized gain on the 1 loan was ~~$12~~$4 thousand at ~~June 30, 2020.~~March 31, 2021.

Contingent Consideration Liability

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

the projected revenue may result in a higher fair value of the contingent consideration liability. Alternatively, a decrease in the projected revenue may result in a lower estimated fair value of the contingent consideration liability.

~~Table of Contents~~

The following table presents the assets and liabilities measured at fair value on a recurring basis at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, classified using the fair value hierarchy:


		At June 30, 2020																At March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value		(Dollars in thousands)	Level 1		Level 2		Level 3			Assets/ Liabilities at Fair Value
Assets:	Assets:																Assets:
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:

State and political subdivisions	State and political subdivisions	$	—	$	21,578	$	—	$	21,578	State and political subdivisions	$	0	$	10,210	$	0		$	10,210
Residential mortgage-backed securities	Residential mortgage-backed securities	—		80,472		—		80,472		Residential mortgage-backed securities	0		133,391		0			133,391
Collateralized mortgage obligations	Collateralized mortgage obligations	—		6,080		—		6,080		Collateralized mortgage obligations	0		4,657		0			4,657
Corporate bonds	Corporate bonds	—		86,071		—		86,071		Corporate bonds	0		80,971		9,600			90,571
Total available-for-sale securities	Total available-for-sale securities	—		194,201		—		194,201		Total available-for-sale securities	0		229,229		9,600			238,829
Equity securities:	Equity securities:									Equity securities:
Equity securities - financial services industry	Equity securities - financial services industry	712		—		—		712		Equity securities - financial services industry	933		0		0			933
Money market mutual funds	Money market mutual funds	1,236		—		—		1,236		Money market mutual funds	2,591		0		0			2,591
Total equity securities	Total equity securities	1,948		—		—		1,948		Total equity securities	3,524		0		0			3,524
Loans*	Loans*	—		—		255		255		Loans*	0		0		152			152
Loans held for sale										Loans held for sale	0		22,636		0			22,636

Interest rate locks with customers*	Interest rate locks with customers*	—		3,453		—		3,453		Interest rate locks with customers*	0		1,163		0			1,163

Forward loan sale commitments*										Forward loan sale commitments*	0		1,222		0			1,222
Total assets	Total assets	$	1,948	$	197,654	$	255	$	199,857	Total assets	$	3,524	$	254,250	$	9,752		$	267,526
Liabilities:	Liabilities:									Liabilities:
Contingent consideration liability	Contingent consideration liability	$	—	$	—	$	109	$	109	Contingent consideration liability	$	0	$	0	$	28		$	28
Interest rate swaps*	Interest rate swaps*	—		708		—		708		Interest rate swaps*	0		455		0			455
Credit derivatives*	Credit derivatives*	—		—		912		912		Credit derivatives*	0		0		271			271

Forward loan sale commitments*		—		582		—		582

Total liabilities	Total liabilities	$	—	$	1,290	$	1,021	$	2,311	Total liabilities	$	0	$	455	$	299		$	754

* Such financial instruments are recorded at fair value as further described in Note 11, "Derivative Instruments and Hedging Activities."

The $9.6 million of corporate bonds was comprised of one investment grade bond and the Corporation ~~recorded no unrealized gains and losses within other comprehensive income for recurring Level 3~~utilizes a third party to estimate fair value. The value ~~measurements held at June 30, 2020.~~is derived from a discounted cash flow analysis which utilizes a probability of default input. The ~~$912~~$271 thousand of credit derivatives liability represents the Credit Valuation Adjustment (CVA), which is obtained from real-time financial market data, of ~~fifty-eight~~110 interest rate swaps with a current notional amount of ~~$393.4~~$707.3 million. The ~~June 30, 2020~~March 31, 2021 CVA assumes a zero-deal recovery percentage based on the most recent index credit curve.

~~Table of Contents~~


		At December 31, 2019															At December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value		(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
Assets:	Assets:									Assets:
Available-for-sale securities:	Available-for-sale securities:									Available-for-sale securities:

U.S. government corporations and agencies		$	—	$	300	$	—	$	300

State and political subdivisions	State and political subdivisions	—		34,595		—		34,595		State and political subdivisions	$	0	$	13,537	$	0	$	13,537
Residential mortgage-backed securities	Residential mortgage-backed securities	—		118,460		—		118,460		Residential mortgage-backed securities	0		114,163		0		114,163
Collateralized mortgage obligations	Collateralized mortgage obligations	—		2,361		—		2,361		Collateralized mortgage obligations	0		5,321		0		5,321
Corporate bonds	Corporate bonds	—		91,208		—		91,208		Corporate bonds	0		76,019		9,600		85,619
Total available-for-sale securities	Total available-for-sale securities	—		246,924		—		246,924		Total available-for-sale securities	0		209,040		9,600		218,640
Equity securities:	Equity securities:									Equity securities:
Equity securities - financial services industry	Equity securities - financial services industry	1,004		—		—		1,004		Equity securities - financial services industry	818		0		0		818
Money market mutual funds	Money market mutual funds	1,619		—		—		1,619		Money market mutual funds	2,461		0		0		2,461
Total equity securities	Total equity securities	2,623		—		—		2,623		Total equity securities	3,279		0		0		3,279
Loans*	Loans*	—		—		317		317		Loans*	0		0		187		187

Loans held for sale										Loans held for sale	0		37,039		0		37,039
Interest rate locks with customers*	Interest rate locks with customers*	—		399		—		399		Interest rate locks with customers*	0		2,894		0		2,894

Total assets	Total assets	$	2,623	$	247,323	$	317	$	250,263	Total assets	$	3,279	$	248,973	$	9,787	$	262,039
Liabilities:	Liabilities:									Liabilities:
Contingent consideration liability	Contingent consideration liability	$	—	$	—	$	160	$	160	Contingent consideration liability	$	0	$	0	$	55	$	55
Interest rate swaps*	Interest rate swaps*	—		249		—		249		Interest rate swaps*	0		541		0		541
Credit derivatives*	Credit derivatives*	—		—		176		176		Credit derivatives*	0		0		535		535
Forward loan sale commitments*	Forward loan sale commitments*	—		19		—		19		Forward loan sale commitments*	0		752		0		752
Total liabilities	Total liabilities	$	—	$	268	$	336	$	604	Total liabilities	$	0	$	1,293	$	590	$	1,883

* Such financial instruments are recorded at fair value as further described in Note 11, "Derivative Instruments and Hedging Activities."

The following table includes a rollforward of corporate bonds, loans and credit derivatives for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Six Months Ended June 30, 2020																	Three Months Ended March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Balance at December 31, 2019		Additions		Payments received		Increase in value		Balance at June 30, 2020		(Dollars in thousands)	Balance at December 31, 2020		Additions		Payments received			(Decrease) increase in value		Balance at March 31, 2021

Corporate bonds												Corporate bonds	$	9,600	$	0	$	0		$	0	$	9,600
Loans	Loans	$	317	$	—	$	(60)	$	(2)	$	255	Loans	187		0		(33)			(2)		152
Credit derivatives	Credit derivatives	(176)		(2,541)		—		1,805		(912)		Credit derivatives	(535)		(843)		0			1,107		(271)
Net total	Net total	$	141	$	(2,541)	$	(60)	$	1,803	$	(657)	Net total	$	9,252	$	(843)	$	(33)		$	1,105	$	9,481


		Six Months Ended June 30, 2019																	Three Months Ended March 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Balance at December 31, 2018		Additions		Payments received		Increase in value		Balance at June 30, 2019		(Dollars in thousands)	Balance at December 31, 2019		Additions		Payments received			Increase in value		Balance at March 31, 2020
Corporate bonds		$	25,729	$	—	$	—	$	1,196	$	26,925

Loans	Loans	1,779		—		(78)		24		1,725		Loans	$	317	$	0	$	(30)		$	1	$	288
Credit derivatives	Credit derivatives	(72)		(670)		—		582		(160)		Credit derivatives	(176)		(1,073)		0			140		(1,109)
Net total	Net total	$	27,436	$	(670)	$	(78)	$	1,802	$	28,490	Net total	$	141	$	(1,073)	$	(30)		$	141	$	(821)

4234

~~Table of Contents~~

The following table presents the change in the balance of the contingent consideration liability related to acquisitions for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Six Months Ended June 30, 2020																			Three Months Ended March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Balance at December 31, 2019		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at June 30, 2020		(Dollars in thousands)	Balance at December 31, 2020		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at March 31, 2021
Girard Partners	Girard Partners	$	160	$	—	$	61	$	10	$	109	Girard Partners	$	55	$	0	$	29	$	2	$	28
Total contingent consideration liability	Total contingent consideration liability	$	160	$	—	$	61	$	10	$	109	Total contingent consideration liability	$	55	$	0	$	29	$	2	$	28


		Six Months Ended June 30, 2019																			Three Months Ended March 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Balance at December 31, 2018		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at June 30, 2019		(Dollars in thousands)	Balance at December 31, 2019		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at March 31, 2020
Girard Partners	Girard Partners	$	259	$	—	$	65	$	17	$	211	Girard Partners	$	160	$	0	$	31	$	6	$	135
Total contingent consideration liability	Total contingent consideration liability	$	259	$	—	$	65	$	17	$	211	Total contingent consideration liability	$	160	$	0	$	31	$	6	$	135

The Corporation may be required to periodically measure certain assets and liabilities at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or market accounting or changes in the value of loans held for investment analyzed on an individual basis. The following table represents assets measured at fair value on a non-recurring basis at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


		At June 30, 2020															At March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value		(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	Individually analyzed loans held for investment	$	—	$	—	$	24,640	$	24,640	Individually analyzed loans held for investment	$	0	$	0	$	29,564	$	29,564

Other real estate owned	Other real estate owned	—		—		8,642		8,642		Other real estate owned	0		0		7,481		7,481
Total	Total	$	—	$	—	$	33,282	$	33,282	Total	$	0	$	0	$	37,045	$	37,045


		At December 31, 2019															At December 31, 2020
(Dollars in thousands)	(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value		(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Impaired loans held for investment		$	—	$	—	$	36,018	$	36,018
Impaired leases held for investment		—		—		277		277
Individually analyzed loans held for investment										Individually analyzed loans held for investment	$	0	$	0	$	30,900	$	30,900

Other real estate owned	Other real estate owned	—		—		516		516		Other real estate owned	0		0		7,355		7,355
Total	Total	$	—	$	—	$	36,811	$	36,811	Total	$	0	$	0	$	38,255	$	38,255

4335

~~Table of Contents~~

The following table presents assets and liabilities not measured at fair value on a recurring or non-recurring basis in the Corporation’s condensed consolidated balance sheets but for which the fair value is required to be disclosed at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. The disclosed fair values are classified using the fair value hierarchy.


		At June 30, 2020																			At March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount		(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:	Assets:											Assets:
Cash and short-term interest-earning assets	Cash and short-term interest-earning assets	$	348,529	$	—	$	—	$	348,529	$	348,529	Cash and short-term interest-earning assets	$	187,317	$	0	$	0	$	187,317	$	187,317

Held-to-maturity securities	Held-to-maturity securities	—		208,307		—		208,307		201,703		Held-to-maturity securities	0		139,298		0		139,298		135,153
Federal Home Loan Bank, Federal Reserve Bank and other stock	Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		28,192		Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		25,571
Loans held for sale		14,416		16,863		—		31,279		31,082
Net loans and leases held for investment	Net loans and leases held for investment	—		—		4,977,902		4,977,902		4,840,697		Net loans and leases held for investment	0		0		5,381,681		5,381,681		5,313,793
Servicing rights	Servicing rights	—		—		6,191		6,191		6,081		Servicing rights	0		0		9,655		9,655		7,015

Total assets	Total assets	$	362,945	$	225,170	$	4,984,093	$	5,572,208	$	5,456,284	Total assets	$	187,317	$	139,298	$	5,391,336	$	5,717,951	$	5,668,849
Liabilities:	Liabilities:											Liabilities:
Deposits:	Deposits:											Deposits:
Demand and savings deposits, non-maturity	Demand and savings deposits, non-maturity	$	4,348,844	$	—	$	—	$	4,348,844	$	4,348,844	Demand and savings deposits, non-maturity	$	4,837,381	$	0	$	0	$	4,837,381	$	4,837,381
Time deposits	Time deposits	—		532,459		—		532,459		520,485		Time deposits	0		482,098		0		482,098		474,211
Total deposits	Total deposits	4,348,844		532,459		—		4,881,303		4,869,329		Total deposits	4,837,381		482,098		0		5,319,479		5,311,592
Short-term borrowings	Short-term borrowings	—		210,780		—		210,780		210,780		Short-term borrowings	0		26,676		0		26,676		26,676
Long-term debt	Long-term debt	—		215,137		—		215,137		210,039		Long-term debt	0		97,193		0		97,193		95,000
Subordinated notes	Subordinated notes	—		93,430		—		93,430		94,903		Subordinated notes	0		181,000		0		181,000		173,617
Total liabilities	Total liabilities	$	4,348,844	$	1,051,806	$	—	$	5,400,650	$	5,385,051	Total liabilities	$	4,837,381	$	786,967	$	0	$	5,624,348	$	5,606,885


	At December 31, 2020
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	219,858	$	0	$	0	$	219,858	$	219,858
Held-to-maturity securities	0		156,325		0		156,325		151,257
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		28,183
Net loans and leases held for investment	0		0		5,338,782		5,338,782		5,192,710
Servicing rights	0		0		6,783		6,783		6,408
Total assets	$	219,858	$	156,325	$	5,345,565	$	5,721,748	$	5,598,416
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	4,678,940	$	0	$	0	$	4,678,940	$	4,678,940
Time deposits	0		574,018		0		574,018		563,775
Total deposits	4,678,940		574,018		0		5,252,958		5,242,715
Short-term borrowings	0		17,906		0		17,906		17,906
Long-term debt	0		112,968		0		112,968		110,000
Subordinated notes	0		190,045		0		190,045		183,515
Total liabilities	$	4,678,940	$	894,937	$	0	$	5,573,877	$	5,554,136

4436

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At December 31, 2019
(Dollars in thousands) Level 1 Level 2 Level 3 Fair
Value Carrying
Amount
Assets:
Cash and short-term interest-earning assets $ 125,128 $ — $ — $ 125,128 $ 125,128
Held-to-maturity securities — 194,886 — 194,886 192,052
Federal Home Loan Bank, Federal Reserve Bank and other stock NA NA NA NA 28,254
Loans held for sale — 5,560 — 5,560 5,504
Net loans and leases held for investment — — 4,309,208 4,309,208 4,314,893
Servicing rights — — 9,340 9,340 6,626
Total assets $ 125,128 $ 200,446 $ 4,318,548 $ 4,644,122 $ 4,672,457
Liabilities:
Deposits:
Demand and savings deposits, non-maturity $ 3,754,065 $ — $ — $ 3,754,065 $ 3,754,065
Time deposits — 609,387 — 609,387 606,010
Total deposits 3,754,065 609,387 — 4,363,452 4,360,075
Short-term borrowings — 18,680 — 18,680 18,680
Long-term debt — 151,343 — 151,343 150,098
Subordinated notes — 96,663 — 96,663 94,818
Total liabilities $ 3,754,065 $ 876,073 $ — $ 4,630,138 $ 4,623,671

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

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

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

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

Loans held for sale: Loans held for sale are carried at the lower of cost or estimated fair value. The fair value of the Corporation’s mortgage loans held for sale are generally determined using a pricing model based on current market information obtained from external sources, including interest rates, bids or indications provided by market participants on specific loans that are actively marketed for sale. These loans are primarily residential mortgage loans and are generally classified in Level 2 due to the observable pricing data. At June 30, 2020, loans held for sale included four accruing commercial real estate loans for one borrower for $14.4 million. The fair value of these loans was measured based on the estimated sale price of the loans and is classified within Level 1 in the fair value hierarchy.

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

Individually analyzed loans and leases held for investment: For individually analyzed loans and leases, the Corporation uses a variety of techniques to measure fair value, such as using the current appraised value of the collateral, agreements of sale, discounting the contractual cash flows, and analyzing market data that the Corporation may adjust due to specific characteristics of the loan/lease or collateral. At ~~June 30,~~March 31, 2021, individually analyzed loans held for investment had a carrying amount of $29.8 million with a valuation allowance of $281 thousand. At December 31, 2020, individually analyzed loans held for investment had a carrying amount of ~~$25.8~~

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$31.5 million with a valuation allowance of ~~$1.1 million. At December 31, 2019, impaired loans held for investment had a carrying amount of $38.1 million with a valuation allowance of $2.1 million.~~$585 thousand. The Corporation had 0 individually analyzed leases at ~~June 30, 2020. The Corporation had impaired leases of $277 thousand with no reserve at~~March 31, 2021 or December 31, ~~2019.~~2020.

Servicing rights: The Corporation estimates the fair value of servicing rights using discounted cash flow models that calculate the present value of estimated future net servicing income. The model uses readily available prepayment speed assumptions for the interest rates of the portfolios serviced. Servicing rights are classified within Level 3 in the fair value hierarchy based upon management's assessment of the inputs. The Corporation reviews the servicing rights portfolio on a quarterly basis for impairment and the servicing rights are carried at the lower of amortized cost or estimated fair value. At ~~June 30,~~March 31, 2021, servicing rights had a net carrying amount of $7.0 million, which included a valuation allowance of $1 thousand. At December 31, 2020, servicing rights had a net carrying amount of ~~$6.1~~$6.5 million, which included a valuation allowance of ~~$338~~$87 thousand. ~~At December 31, 2019, servicing rights carrying amount of $6.6 million with 0 valuation allowance.~~

Goodwill and other identifiable assets: Certain non-financial assets subject to measurement at fair value on a non-recurring basis include goodwill and other identifiable intangible assets. During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, there were no required valuation adjustments of goodwill and other identifiable intangible assets.

Other real estate owned: ~~The fair value of other~~Other real estate owned (OREO) ~~is originally estimated based upon~~represents properties that the ~~appraised value less estimated costs to sell.~~Corporation has acquired through foreclosure by either accepting a deed in lieu of foreclosure, or by taking possession of assets that were used as loan collateral. The Corporation reports OREO at the lower of cost or fair value less cost to sell, ~~becomes the "original cost"~~adjusted periodically based on a current appraisal or an executed agreement of ~~the OREO asset. Subsequently, OREO is reported at the lower of the original cost or the current fair value less cost to sell.~~sale. Capital improvement expenses associated with the construction or repair of the property are capitalized as part of the cost of the OREO ~~asset; however,~~asset. Write-downs and any gain or loss upon the ~~capitalized expenses may not increase~~sale of OREO is recorded in other noninterest income. OREO is reported in other assets on the OREO asset's recorded value to an amount greater than the asset's fair value after improvements and less cost to sell. New appraisals are generally obtained on an annual basis if an agreement of sale does not exist.condensed consolidated balance sheet. During the ~~six~~three months ended ~~June 30, 2020, one property was~~March 31, 2021, three commercial real estate properties were transferred to OREO with a carrying balance of ~~$8.1 million.~~$126 thousand. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, OREO had a carrying amount of ~~$8.6~~$7.5 million and ~~$540 thousand,~~$7.4 million, respectively. Other real estate owned is classified within Level 3 of the valuation hierarchy due to the unique characteristics of the collateral for each loan.

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

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

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

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

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Note 13. Segment Reporting

At ~~June 30, 2020,~~March 31, 2021, the Corporation has 3 reportable business segments: Banking, Wealth Management and Insurance. The Corporation determines the segments based primarily upon product and service offerings, through the types of income generated and the regulatory environment. This is strategically how the Corporation operates and has positioned itself in the marketplace. Accordingly, significant operating decisions are based upon analysis of each of these segments. The parent holding company and intercompany eliminations are included in the "Other" segment.

Each segment generates revenue from a variety of products and services it provides. Examples of products and services provided for each reportable segment are indicated ~~below.~~as follows:


●			The Banking segment provides financial services to individuals, businesses, municipalities and nonprofit organizations. These services include a full range of banking services such as deposit taking, loan origination and servicing, mortgage banking, other general banking services and equipment lease financing.
●			The Wealth Management segment offers ~~trust and~~ investment advisory, ~~services, guardian and custodian of employee benefits and other~~financial planning, trust and brokerage ~~services, as well as~~services. The Wealth Management segment serves a ~~registered investment advisory managing~~diverse client base of private ~~investment accounts for both~~families and individuals, municipal pension plans, retirement plans, trusts and ~~institutions.~~guardianships.
●			The Insurance segment includes a full-service insurance brokerage agency offering commercial property and casualty insurance, ~~group life and health coverage,~~ employee benefit solutions, personal insurance lines and human resources consulting.

The following table provides total assets by reportable business segment as of the dates indicated.


(Dollars in thousands)	(Dollars in thousands)	At June 30, 2020		At December 31, 2019		At June 30, 2019		(Dollars in thousands)	At March 31, 2021		At December 31, 2020		At March 31, 2020
Banking	Banking	$	6,024,054	$	5,282,505	$	5,059,733	Banking	$	6,313,000	$	6,234,336	$	5,362,279
Wealth Management	Wealth Management	46,141		44,591		42,024		Wealth Management	48,124		48,646		45,786
Insurance	Insurance	34,574		34,291		32,256		Insurance	37,075		35,906		35,935
Other	Other	20,543		19,537		20,285		Other	18,466		17,608		20,768
Consolidated assets	Consolidated assets	$	6,125,312	$	5,380,924	$	5,154,298	Consolidated assets	$	6,416,665	$	6,336,496	$	5,464,768

The following tables provide reportable segment-specific information and reconciliations to consolidated financial information for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.


		Three Months Ended																			Three Months Ended
		June 30, 2020																			March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated		(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	Interest income	$	49,971	$	—	$	—	$	9	$	49,980	Interest income	$	51,449	$	0	$	0	$	8	$	51,457
Interest expense	Interest expense	5,256		—		—		1,206		6,462		Interest expense	3,750		0		0		2,293		6,043
Net interest income		44,715		—		—		(1,197)		43,518
Provision for credit losses		23,737		—		—		—		23,737
Net interest income (expense)												Net interest income (expense)	47,699		0		0		(2,285)		45,414
Reversal of provision for credit losses												Reversal of provision for credit losses	(11,283)		0		0		0		(11,283)
Noninterest income	Noninterest income	8,284		5,504		4,209		3		18,000		Noninterest income	11,230		6,773		5,105		142		23,250

Noninterest expense	Noninterest expense	28,546		3,729		2,925		760		35,960		Noninterest expense	30,496		4,191		3,304		1,549		39,540
Intersegment (revenue) expense*	Intersegment (revenue) expense*	(274)		146		128		—		—		Intersegment (revenue) expense*	(323)		164		159		0		0
Income (loss) before income taxes		990		1,629		1,156		(1,954)		1,821
Income tax (benefit) expense		(578)		331		242		(259)		(264)
Income (expense) before income taxes												Income (expense) before income taxes	40,039		2,418		1,641		(3,692)		40,407
Income tax expense (benefit)												Income tax expense (benefit)	8,271		498		351		(1,316)		7,804
Net income (loss)	Net income (loss)	$	1,568	$	1,298	$	914	$	(1,695)	$	2,085	Net income (loss)	$	31,768	$	1,920	$	1,290	$	(2,376)	$	32,603

Capital expenditures		$	1,274	$	1	$	6	$	20	$	1,301
Net capital expenditures												Net capital expenditures	$	1,111	$	5	$	9	$	62	$	1,187

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Three Months Ended
June 30, 2019
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 54,041 $ 11 $ — $ 8 $ 54,060
Interest expense 10,164 — — 1,261 11,425
Net interest income 43,877 11 — (1,253) 42,635
Provision for credit losses 2,073 — — — 2,073
Noninterest income 6,014 6,155 4,145 42 16,356
Noninterest expense 28,334 3,893 3,151 1,403 36,781
Intersegment (revenue) expense* (295) 161 134 — —
Income (expense) before income taxes 19,779 2,112 860 (2,614) 20,137
Income tax expense (benefit) 3,660 409 70 (470) 3,669
Net income (loss) $ 16,119 $ 1,703 $ 790 $ (2,144) $ 16,468
Capital expenditures $ 371 $ 35 $ 39 $ 137 $ 582

Six Months Ended
June 30, 2020
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 101,975 $ 7 $ — $ 17 $ 101,999
Interest expense 13,532 — — 2,481 16,013
Net interest income 88,443 7 — (2,464) 85,986
Provision for credit losses 45,580 — — — 45,580
Noninterest income 15,836 11,691 9,096 (239) 36,384
Noninterest expense 59,793 7,907 6,121 916 74,737
Intersegment (revenue) expense* (556) 298 258 — —
(Loss) income before income taxes (538) 3,493 2,717 (3,619) 2,053
Income tax (benefit) expense (1,422) 713 577 (738) (870)
Net income (loss) $ 884 $ 2,780 $ 2,140 $ (2,881) $ 2,923
Capital expenditures $ 1,645 $ 6 $ 9 $ 20 $ 1,680

Six Months Ended
June 30, 2019
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 106,387 $ 21 $ — $ 16 $ 106,424
Interest expense 19,744 — — 2,522 22,266
Net interest income 86,643 21 — (2,506) 84,158
Provision for credit losses 4,753 — — — 4,753
Noninterest income 10,985 11,875 9,498 295 32,653
Noninterest expense 56,351 7,792 6,365 1,835 72,343
Intersegment (revenue) expense* (594) 327 267 — —
Income (expense) before income taxes 37,118 3,777 2,866 (4,046) 39,715
Income tax expense (benefit) 6,780 723 263 (598) 7,168
Net income (loss) $ 30,338 $ 3,054 $ 2,603 $ (3,448) $ 32,547
Capital expenditures $ 1,136 $ 74 $ 64 $ 158 $ 1,432


	Three Months Ended
	March 31, 2020
(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	52,004	$	7	$	0	$	8	$	52,019
Interest expense	8,276		0		0		1,275		9,551
Net interest income (expense)	43,728		7		0		(1,267)		42,468
Provision for credit losses	21,843		0		0		0		21,843
Noninterest income	7,552		6,187		4,887		(242)		18,384

Other noninterest expense	31,247		4,178		3,196		156		38,777
Intersegment (revenue) expense*	(282)		152		130		0		0
(Loss) income before income taxes	(1,528)		1,864		1,561		(1,665)		232
Income tax (benefit) expense	(844)		382		336		(480)		(606)
Net (loss) income	$	(684)	$	1,482	$	1,225	$	(1,185)	$	838

Net capital expenditures	$	371	$	5	$	3	$	0	$	379

*Includes an allocation of general and administrative expenses from both the parent holding company and the Bank. These expenses are generally allocated based upon number of employees and square footage utilized.

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~~Note 14. Leases~~

~~The following table provides information with respect to the Corporation's operating leases:~~

Three months ended June 30, Six months ended June 30,
(Dollars in thousands) 2020 2019 2020 2019
Operating lease cost $ 961 $ 947 $ 1,914 $ 1,894
Short-term lease cost 3 — 6 —
Variable lease cost 2 — 3 —
Total lease cost $ 966 $ 947 $ 1,923 $ 1,894
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from leases $ 922 $ 866 1,832 1,739
At June 30, 2020 At December 31, 2019
Weighted-average remaining lease term in years 14.6 15.2
Weighted-average discount rate 4.22 % 4.24 %

~~At June 30, 2020, maturities of lease liabilities are as follows:~~

Maturity of Lease Liabilities (Dollars in thousands) Amount
Remainder of 2020 $ 1,866
2021 3,742
2022 3,727
2023 3,677
2024 3,547
Thereafter 34,555
Total lease payments 51,114
Less: imputed interest (13,687)
Present value of lease liabilities $ 37,427

Note ~~15.~~14. Contingencies

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

4939

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

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

Forward-Looking Statements

The information contained in this report may contain forward-looking statements. When used or incorporated by reference in disclosure documents, the words ~~“believe,” “anticipate,” “estimate,” “expect,” “project,” “target,” “goal”~~"believe" "anticipate," "estimate," "expect," "project," "target," "goal" and similar expressions are intended to identify forward-looking statements within the meaning of section 27A of the Securities Act of 1933 and section 21E of the Securities Exchange Act of 1934. These forward-looking statements include but are not limited to: statements of our goals, intentions and expectations; statements regarding our business plans, prospects, growth and operating strategies; statements regarding the quality of our loan and investment portfolios; and estimates of our risks and future costs and benefits. These forward-looking statements are based on current beliefs and expectations of our management and are ~~inherently~~ subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Such forward-looking statements are subject to certain risks, uncertainties and assumptions, including but not limited to those set forth below:

•Operating, legal and regulatory risks;

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

•Legislative, regulatory and accounting changes;

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

•Major catastrophes such as earthquakes, floods or other natural or human disasters and infectious disease outbreaks, including the current coronavirus (COVID-19) pandemic, the related disruption to local, regional and global economic activity and financial markets, and the impact that any of the foregoing may have on us and our customers and other constituencies;

•Volatility in interest rates;

•Fluctuations in real estate values in our market area;

•The composition and credit quality of our loan and investment portfolios;

•Changes in the level and direction of loan delinquencies, classified and criticized loans and charge-offs and changes in estimates of the adequacy of the allowance for credit losses;

•Our ability to access cost-effective funding;

•Our ability to continue to implement our business strategies;

•Our ability to manage market risk, credit risk and operational risk;

•Timing of revenue and expenditures;

•Adverse changes in the securities markets;

•Our ability to enter new markets successfully and capitalize on growth opportunities;

•~~Return on investment decisions;~~Competition for loans and deposits;

•System failures or cyber-security breaches of our information technology infrastructure and those of our third-party service providers;

•The failure to maintain current technologies and to successfully implement future information technology enhancements;

•Our ability to retain key employees;

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

•The risk that our analysis of these risks and forces could be incorrect and/or that the strategies developed to address them could be unsuccessful.

The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments ordered non-essential businesses to close and residents to shelter in place at home. While jurisdictions in which we operate have gradually allowed the reopening of businesses and other organizations and removed the sheltering restrictions, it is premature to assess whether doing so will result in a meaningful increase in economic activity and the impact of such actions on further COVID-19 cases. Given its ongoing and dynamic nature, it is difficult to predict the full impact of the

COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated. As a result of the COVID-19 pandemic and the related

~~Table of Contents~~

adverse local and national economic consequences, our forward-looking statements are also subject to the following risks, uncertainties and assumptions:

•Demand for our products and services may ~~decline;~~decline, making it difficult to grow assets and income;

•If the economy is unable to ~~substantially~~remain open, and ~~successfully reopen, and high~~higher levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may ~~increase;~~increase, resulting in increased charge-offs and reduced income;

•Collateral for loans, especially real estate, may decline in ~~value;~~value, which could cause loan losses to increase;

•Our allowance for credit losses on loans and leases may increase if borrowers experience financial ~~difficulties;~~difficulties, which will adversely affect our net income;

•The net worth and liquidity of loan guarantors may ~~decline;~~decline, impairing their ability to honor commitments to us;

•A ~~further and~~ sustained decline in our stock price or the occurrence of what management would deem to be a triggering event that could ~~under certain circumstances, cause management to perform impairment testing on its~~result in a goodwill or ~~core deposit and customer relationships intangibles that could result in an~~intangible impairment charge being recorded ~~for that period,~~ that would adversely impact our results of operations and the ability of the Bank to pay dividends to us;

•As a result of the decline in the Federal Reserve’s target federal funds rate to near 0%, the yield on our assets may decline to a greater extent than the decline in our cost of interest-bearing liabilities;

•A material decrease in net income or a net loss over several quarters could result in the elimination of or a decrease in the rate of our quarterly cash dividend;

•Our wealth management revenues may decline with continuing market turmoil;

•Our cyber security risks are increased as a result of an increase in the number of employees working remotely;

•We rely on third-party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us; and

•FDIC premiums may increase if the agency experience additional resolution costs; and

•We face litigation, regulatory enforcement and reputation risk as a result of our participation in the ~~Paycheck Protection Program (PPP)~~PPP and the risk that the Small Business Administration may not fund some or all PPP loan guaranties.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, expected or projected. These and other risk factors are more fully described in this report and in the Univest Financial Corporation Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 under the section entitled "Item 1A - Risk Factors," and from time to time in other filings made by the Corporation with the SEC.

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

Critical Accounting Policies

Management, in order to prepare the Corporation’s financial statements in conformity with U.S. generally accepted accounting principles, is required to make estimates and assumptions that affect the amounts reported in the Corporation’s financial statements. There are uncertainties inherent in making these estimates and assumptions. Certain critical accounting policies could materially affect the results of operations and financial position of the Corporation should changes in circumstances require a change in related estimates or assumptions. The Corporation ~~had~~has identified the fair value measurement of investment securities available-for-sale and the calculation of the ~~reserve~~allowance for ~~loan~~credit losses on loans and ~~lease losses~~leases, as critical accounting policies. For more information on these critical accounting policies, please refer to the Corporation’s ~~2019~~2020 Annual Report on Form 10-K. See Note 1, "Summary of Significant Accounting Policies" for additional information on the adoption of ASC 326, which changed the methodology under which management calculates its reserve for loans and leases, now referred to as the allowance for credit losses. Management considers the measurement of the allowance for credit losses, in accordance with ASC 326, to be a critical accounting policy.

General

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

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

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

Executive Overview

The Corporation’s consolidated net income, earnings per share and return on average assets and average equity were as follows:


		Three Months Ended													Six Months Ended														Three Months Ended
		June 30,								Change								June 30,									Change					March 31,	Change
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2020			2019			Amount		Percent		2020			2019			Amount		Percent		(Dollars in thousands, except per share data)	2021			2020			Amount		Percent
Net income	Net income	$	2,085		$	16,468		$	(14,383)	(87.3	%)	$	2,923		$	32,547		$	(29,624)	(91.0	%)	Net income	$	32,603		$	838		$	31,765	NM
Net income per share:	Net income per share:																					Net income per share:
Basic	Basic	$	0.07		$	0.56		$	(0.49)	(87.5)		$	0.10		$	1.11		$	(1.01)	(91.0)		Basic	$	1.11		$	0.03		$	1.08	NM
Diluted	Diluted	0.07			0.56			(0.49)		(87.5)		0.10			1.11			(1.01)		(91.0)		Diluted	1.11			0.03			1.08		NM
Return on average assets	Return on average assets	0.14		%	1.28		%	(114 BP)		(89.1)		0.10		%	1.29		%	(119 BP)		(92.2)		Return on average assets	2.07		%	0.06		%	201 BP		NM
Return on average equity	Return on average equity	1.27		%	10.23		%	(896 BP)		(87.6)		0.88		%	10.28		%	(940 BP)		(91.4)		Return on average equity	18.90		%	0.50		%	1,840 BP		NM

The Corporation reported net income of ~~$2.1~~$32.6 million, or ~~$0.07~~$1.11 diluted earnings per share, for the three months ended ~~June 30, 2020,~~March 31, 2021, compared to net income of ~~$16.5 million,~~$838 thousand, or ~~$0.56~~$0.03 diluted earnings per share, for the three months ended June 30, 2019. Net income for the six months ended June 30, 2020 was $2.9 million, or $0.10 diluted earnings per share, compared to net income of $32.5 million, or $1.11 diluted earnings per share, for the six months ended June 30, 2019.

The Corporation adopted CECL effective January 1, 2020, as discussed in Note 1. Summary of Significant Accounting Policies. Upon adoption, the allowance for credit losses on loans and leases increased by $12.9 million, the allowance for credit losses on investments increased by $300 thousand, and the reserve for unfunded commitments increased by $1.1 million, which, in the aggregate, resulted in an after-tax retained earnings adjustment of $11.3 million.March 31, 2020.

During the three months ended ~~June 30, 2020,~~March 31, 2021, the Corporation recorded a reversal of provision for credit losses of ~~$23.7~~$11.3 million, of which ~~$21.5 million related to loans and leases and $2.2 million related to unfunded commitments. Included within the $21.5 million in provision for credit losses was $19.9~~$12.9 million (after-tax ~~charge~~benefit of ~~$15.7~~$10.2 million), or $0.54 diluted earnings per share, which was attributable to changes in economic assumptions within the Corporation’s CECL model, which were predominately driven by COVID-19. During the six months ended June 30, 2020, the Corporation recorded CECL related charges of $45.6 million, of which $40.2 million (after-tax charge of $31.8 million), or $1.09$0.35 diluted earnings per share, was attributable to ~~economic~~favorable changes in economic-related assumptions within the Corporation’s CECL ~~model.~~model partially offset by a reserve increase attributable to loan growth. The provision for ~~loan and lease~~credit losses for the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 was ~~$2.1~~$21.8 million ~~and $4.8~~of which $20.3 million ~~respectively.~~(after-tax charge of $16.1 million), or $0.55 diluted earnings per share, was attributable to adverse changes in economic-related assumptions.

~~During the three months ended June 30,~~On December 27, 2020, the ~~Corporation originated approximately 2,550 loans totaling approximately $510 million through the PPP, which was enacted as a component of the CARES~~Consolidated Appropriations Act, ~~that~~2021, was signed into law, ~~on March 27, 2020.~~which provides new COVID-19 relief funds, additional funding under the PPP and the establishment of PPP Second Draw Loans. The Small Business Administration (SBA) announced the taking of certain steps under the PPP to further promote equitable relief for smaller businesses. Under this program, we successfully originated approximately 1,200 PPP loans and secured funding of approximately $168.6 million for our customers as of April 15, 2021. During the ~~three months ended June 30, 2020,~~quarter, we recorded income of ~~$2.0~~$4.5 million within net interest income related to these ~~loans. Additionally, during~~loans, of which $2.3 million was the ~~three months ended June 30, 2020, we recorded incremental capitalized compensation~~result of ~~$1.3 million related to the origination~~forgiveness and pay downs of PPP ~~loans.~~loans totaling $119.7 million. As of ~~June 30, 2020, we~~March 31, 2021, the Corporation had ~~$11.0~~$9.5 million of net deferred fees on our balance sheet related to ~~these~~PPP loans.

~~Table of Contents~~

Results of Operations

Net Interest Income

Net interest income is the difference between interest earned on loans and leases and investment securities and interest paid on deposits and borrowings. Net interest income is the principal source of the Corporation’s revenue. Table 1 presents the Corporation’s average balances, tax-equivalent interest income, interest expense, ~~the~~ tax-equivalent yields earned on average assets, ~~the~~ cost of average liabilities, and shareholders’ equity on a tax-equivalent basis for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020. The tax-equivalent net interest margin is tax-equivalent net interest income as a percentage of average interest-earning

assets. The tax-equivalent net interest spread represents the weighted average tax-equivalent yield on interest-earning assets less the weighted average cost of interest-bearing liabilities. The effect of net interest-free funding sources represents the effect on the net interest margin of net funding provided by noninterest-earning assets, noninterest-bearing liabilities and shareholders’ equity. Table 2 analyzes the changes in the tax-equivalent net interest income for the periods broken down by their rate and volume components.

Three ~~and six~~ months ended ~~June 30,~~March 31, 2021 versus 2020 ~~versus 2019~~

Net interest income on a tax-equivalent basis for the three months ended ~~June 30, 2020~~March 31, 2021 was ~~$44.2~~$46.0 million, an increase of ~~$872 thousand,~~$2.8 million, or ~~2.0%~~6.6%, compared to the three months ended ~~June 30, 2019. Net interest income on a tax-equivalent basis for the six months ended June 30, 2020 was $87.3 million, an increase of $1.8 million, or 2.1%, compared to the same period in 2019.~~March 31, 2020. The increase in tax-equivalent net interest income for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 compared to ~~the comparable periods~~same period in the prior year was primarily due to ~~lower deposit and borrowing costs~~$4.5 million in PPP income, a $3.5 million decrease in the cost of interest-bearing liabilities and growth in loans partially offset by a decrease in ~~yield on loans.~~loan and investment yields.

The net interest margin, on a tax-equivalent basis, was ~~3.18% and 3.32%~~3.12% for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared to ~~3.67% and 3.71%~~3.48% for the three ~~and six~~ months ended June 30, 2019, respectively. Purchase accounting accretion had no impact on the net interest margin for the three or six months ended June 30, 2020 compared to a favorable impact of one basis point on the net interest margin for the three and six months ended June 30, 2019.March 31, 2020. Excess liquidity reduced ~~the~~ net interest margin by approximately ~~sixteen and twelve~~eleven basis points for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021 compared to ~~five and two~~six basis points for the three ~~and six~~ months ended ~~June 30, 2019, respectively.~~March 31, 2020. This excess liquidity was primarily driven by strong deposit balance growth over the last ~~year.~~twelve months, which was partially attributable to the various stimulus initiatives associated with the COVID-19 pandemic. PPP loans ~~reduced~~had a favorable impact on net interest margin ~~by nine and~~of four basis points for the three ~~and six~~ months ended ~~June 30, 2020, respectively.~~March 31, 2021 compared to no impact for the three months ended March 31, 2020. Excluding ~~purchase accounting accretion,~~ the impact of excess liquidity and ~~the impact of~~ PPP loans, the net interest margin, on a tax-equivalent basis, was ~~3.43%~~3.19% and ~~3.48%~~3.54% for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and March 31, 2020, ~~respectively, compared to 3.71% and 3.72% for the three and six months ended June 30, 2019,~~ respectively.

5343

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


		Three Months Ended June 30,																											Three Months Ended March 31,
		2020												2019													2021				2020
(Dollars in thousands)	(Dollars in thousands)	Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate		(Dollars in thousands)	Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate
Assets:	Assets:															Assets:
Interest-earning deposits with other banks	Interest-earning deposits with other banks	$	313,668		$	67	0.90	%	$	102,623		$	569	2.22	%	Interest-earning deposits with other banks	$	237,548		$	56	0.10	%	$	118,108		$	325	1.11	%
U.S. government obligations	U.S. government obligations	7,236			36		2.00		17,315			73		1.69		U.S. government obligations	6,998			36		2.09		7,298			37		2.04
Obligations of states and political subdivisions	Obligations of states and political subdivisions	26,546			240		3.64		59,267			507		3.43		Obligations of states and political subdivisions	11,544			105		3.69		33,595			289		3.46
Other debt and equity securities	Other debt and equity securities	378,175			2,182		2.32		394,840			2,572		2.61		Other debt and equity securities	355,827			1,267		1.44		401,007			2,668		2.68
Federal Home Loan Bank, Federal Reserve Bank and other stock	Federal Home Loan Bank, Federal Reserve Bank and other stock	28,977			362		5.02		31,938			535		6.72		Federal Home Loan Bank, Federal Reserve Bank and other stock	26,368			348		5.35		31,450			527		6.74
Total interest-earning deposits, investments and other interest-earning assets	Total interest-earning deposits, investments and other interest-earning assets	754,602			2,887		1.54		605,983			4,256		2.82		Total interest-earning deposits, investments and other interest-earning assets	638,285			1,812		1.15		591,458			3,846		2.62
Commercial, financial and agricultural loans	Commercial, financial and agricultural loans	816,976			7,330		3.61		820,009			10,589		5.18		Commercial, financial and agricultural loans	782,208			6,798		3.52		821,267			8,631		4.23
Paycheck Protection Program loans	Paycheck Protection Program loans	370,669			2,128		2.31		—			—		—		Paycheck Protection Program loans	506,939			4,524		3.62		—			—		—
Real estate—commercial and construction loans	Real estate—commercial and construction loans	2,232,827			23,110		4.16		1,912,248			23,110		4.85		Real estate—commercial and construction loans	2,621,981			24,458		3.78		2,139,369			23,917		4.50
Real estate—residential loans	Real estate—residential loans	1,004,671			10,270		4.11		941,712			11,483		4.89		Real estate—residential loans	1,037,000			9,873		3.86		991,550			11,052		4.48
Loans to individuals	Loans to individuals	29,079			327		4.52		31,939			510		6.40		Loans to individuals	26,447			265		4.06		30,016			407		5.45
Municipal loans and leases	Municipal loans and leases	291,433			2,977		4.11		335,399			3,305		3.95		Municipal loans and leases	245,638			2,530		4.18		317,006			3,265		4.14
Lease financings	Lease financings	91,203			1,592		7.02		81,762			1,459		7.16		Lease financings	105,684			1,737		6.67		89,376			1,554		6.99
Gross loans and leases	Gross loans and leases	4,836,858			47,734		3.97		4,123,069			50,456		4.91		Gross loans and leases	5,325,897			50,185		3.82		4,388,584			48,826		4.47
Total interest-earning assets	Total interest-earning assets	5,591,460			50,621		3.64		4,729,052			54,712		4.64		Total interest-earning assets	5,964,182			51,997		3.54		4,980,042			52,672		4.25
Cash and due from banks	Cash and due from banks	46,970							46,868							Cash and due from banks	55,311							50,891
Reserve for credit losses, loans and leases		(69,292)							(31,847)
Allowance for credit losses, loans and leases																Allowance for credit losses, loans and leases	(83,254)							(44,372)
Premises and equipment, net	Premises and equipment, net	55,750							58,873							Premises and equipment, net	55,826							56,399
Operating lease right-of-use assets	Operating lease right-of-use assets	34,419							35,821							Operating lease right-of-use assets	34,033							34,545
Other assets	Other assets	341,483							331,681							Other assets	357,365							332,056
Total assets	Total assets	$	6,000,790						$	5,170,448						Total assets	$	6,383,463						$	5,409,561
Liabilities:	Liabilities:															Liabilities:
Interest-bearing checking deposits	Interest-bearing checking deposits	$	617,927		$	372	0.24		$	457,231		$	457	0.40		Interest-bearing checking deposits	$	817,940		$	490	0.24		$	584,391		$	796	0.55
Money market savings	Money market savings	1,063,463			853		0.32		982,440			4,234		1.73		Money market savings	1,243,673			853		0.28		1,057,336			2,903		1.10
Regular savings	Regular savings	872,422			475		0.22		818,523			1,013		0.50		Regular savings	959,232			298		0.13		816,760			792		0.39
Time deposits	Time deposits	577,462			2,672		1.86		688,897			3,407		1.98		Time deposits	525,800			1,759		1.36		602,903			2,915		1.94
Total time and interest-bearing deposits	Total time and interest-bearing deposits	3,131,274			4,372		0.56		2,947,091			9,111		1.24		Total time and interest-bearing deposits	3,546,645			3,400		0.39		3,061,390			7,406		0.97
Short-term borrowings	Short-term borrowings	161,365			122		0.30		48,312			217		1.80		Short-term borrowings	17,894			2		0.05		40,126			106		1.06
Long-term debt	Long-term debt	210,040			762		1.46		159,572			836		2.10		Long-term debt	101,333			348		1.39		169,205			764		1.82
Subordinated notes	Subordinated notes	94,890			1,206		5.11		94,663			1,261		5.34		Subordinated notes	183,340			2,293		5.07		94,847			1,275		5.41
Total borrowings	Total borrowings	466,295			2,090		1.80		302,547			2,314		3.07		Total borrowings	302,567			2,643		3.54		304,178			2,145		2.84
Total interest-bearing liabilities	Total interest-bearing liabilities	3,597,569			6,462		0.72		3,249,638			11,425		1.41		Total interest-bearing liabilities	3,849,212			6,043		0.64		3,365,568			9,551		1.14
Noninterest-bearing deposits	Noninterest-bearing deposits	1,663,395							1,198,320							Noninterest-bearing deposits	1,749,502							1,288,594
Operating lease liabilities	Operating lease liabilities	37,680							38,873							Operating lease liabilities	37,415							37,766
Accrued expenses and other liabilities	Accrued expenses and other liabilities	41,196							38,079							Accrued expenses and other liabilities	47,598							44,173
Total liabilities	Total liabilities	5,339,840							4,524,910							Total liabilities	5,683,727							4,736,101
Shareholders’ Equity:	Shareholders’ Equity:															Shareholders’ Equity:
Common stock	Common stock	157,784							157,784							Common stock	157,784							157,784
Additional paid-in capital	Additional paid-in capital	295,681							293,496							Additional paid-in capital	296,136							295,318
Retained earnings and other equity	Retained earnings and other equity	207,485							194,258							Retained earnings and other equity	245,816							220,358
Total shareholders’ equity	Total shareholders’ equity	660,950							645,538							Total shareholders’ equity	699,736							673,460
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	6,000,790						$	5,170,448						Total liabilities and shareholders’ equity	$	6,383,463						$	5,409,561
Net interest income	Net interest income				$	44,159						$	43,287			Net interest income				$	45,954						$	43,121
Net interest spread	Net interest spread						2.92							3.23		Net interest spread						2.90							3.11
Effect of net interest-free funding sources	Effect of net interest-free funding sources						0.26							0.44		Effect of net interest-free funding sources						0.22							0.37
Net interest margin	Net interest margin						3.18	%						3.67	%	Net interest margin						3.12	%						3.48	%
Ratio of average interest-earning assets to average interest-bearing liabilities	Ratio of average interest-earning assets to average interest-bearing liabilities	155.42		%					145.53		%					Ratio of average interest-earning assets to average interest-bearing liabilities	154.95		%					147.97		%

Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments. Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been included in the average loan balances. Tax-equivalent amounts for the three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ have been calculated using the Corporation's federal applicable rate of 21%.

5444

~~Table of Contents~~

Six Months Ended June 30,
2020 2019
(Dollars in thousands) Average
Balance Income/
Expense Average
Rate Average
Balance Income/
Expense Average
Rate
Assets:
Interest-earning deposits with other banks $ 215,888 $ 392 0.37 % $ 72,760 $ 838 2.32 %
U.S. government obligations 7,267 73 2.02 18,669 155 1.67
Obligations of states and political subdivisions 30,070 529 3.54 61,703 1,053 3.44
Other debt and equity securities 389,591 4,850 2.50 390,440 5,203 2.69
Federal Home Loan Bank, Federal Reserve Bank and other stock 30,214 889 5.92 32,148 1,121 7.03
Total interest-earning deposits, investments and other interest-earning assets 673,030 6,733 2.01 575,720 8,370 2.93
Commercial, financial and agricultural loans 819,121 15,961 3.92 815,565 21,347 5.28
Paycheck Protection Program loans 185,334 2,128 2.31 — — —
Real estate—commercial and construction loans 2,186,098 47,027 4.33 1,867,510 44,669 4.82
Real estate—residential loans 998,111 21,322 4.30 940,015 22,895 4.91
Loans to individuals 29,548 734 5.00 32,230 1,028 6.43
Municipal loans and leases 304,219 6,242 4.13 333,858 6,526 3.94
Lease financings 90,289 3,146 7.01 81,330 2,894 7.18
Gross loans and leases 4,612,720 96,560 4.21 4,070,508 99,359 4.92
Total interest-earning assets 5,285,750 103,293 3.93 4,646,228 107,729 4.68
Cash and due from banks 48,931 45,797
Reserve for credit losses, loans and leases (56,832) (30,984)
Premises and equipment, net 56,074 59,025
Operating lease right-of-use assets 34,482 36,472
Other assets 336,122 331,272
Total assets $ 5,704,527 $ 5,087,810
Liabilities:
Interest-bearing checking deposits $ 601,159 $ 1,168 0.39 $ 468,019 $ 1,171 0.50
Money market savings 1,060,399 3,756 0.71 950,641 7,982 1.69
Regular savings 844,591 1,267 0.30 803,859 1,827 0.46
Time deposits 590,183 5,587 1.90 672,193 6,334 1.90
Total time and interest-bearing deposits 3,096,332 11,778 0.76 2,894,712 17,314 1.21
Short-term borrowings 100,745 228 0.46 82,796 855 2.08
Long-term debt 189,623 1,526 1.62 152,475 1,575 2.08
Subordinated notes 94,868 2,481 5.26 94,633 2,522 5.37
Total borrowings 385,236 4,235 2.21 329,904 4,952 3.03
Total interest-bearing liabilities 3,481,568 16,013 0.92 3,224,616 22,266 1.39
Noninterest-bearing deposits 1,475,994 1,144,185
Operating lease liabilities 37,724 39,478
Accrued expenses and other liabilities 42,036 40,936
Total liabilities 5,037,322 4,449,215
Shareholders’ Equity:
Common stock 157,784 157,784
Additional paid-in capital 295,500 293,123
Retained earnings and other equity 213,921 187,688
Total shareholders’ equity 667,205 638,595
Total liabilities and shareholders’ equity $ 5,704,527 $ 5,087,810
Net interest income $ 87,280 $ 85,463
Net interest spread 3.01 3.29
Effect of net interest-free funding sources 0.31 0.42
Net interest margin 3.32 % 3.71 %
Ratio of average interest-earning assets to average interest-bearing liabilities 151.82 % 144.09 %

~~Notes:~~ For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments. Nonaccrual loans and leases have been included in the average loan and lease balances. Loans held for sale have been included in the average loan balances. Tax-equivalent amounts for the six months ended June 30, 2020 and 2019 have been calculated using the Corporation's federal applicable rate of 21%.

~~Table of Contents~~

Table 2—Analysis of Changes in Net Interest Income

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


		Three Months Ended										Six Months Ended									Three Months Ended
		June 30, 2020 Versus 2019										June 30, 2020 Versus 2019									March 31, 2021 Versus 2020
(Dollars in thousands)	(Dollars in thousands)	Volume Change		Rate Change		Total		Volume Change		Rate Change		Total		(Dollars in thousands)	Volume Change		Rate Change		Total
Interest income:	Interest income:													Interest income:
Interest-earning deposits with other banks	Interest-earning deposits with other banks	$	401	$	(903)	$	(502)	$	674	$	(1,120)	$	(446)	Interest-earning deposits with other banks	$	170	$	(439)	$	(269)
U.S. government obligations	U.S. government obligations	(48)		11		(37)		(109)		27		(82)		U.S. government obligations	(2)		1		(1)
Obligations of states and political subdivisions	Obligations of states and political subdivisions	(296)		29		(267)		(554)		30		(524)		Obligations of states and political subdivisions	(202)		18		(184)
Other debt and equity securities	Other debt and equity securities	(107)		(283)		(390)		(10)		(343)		(353)		Other debt and equity securities	(273)		(1,128)		(1,401)
Federal Home Loan Bank, Federal Reserve Bank and other stock	Federal Home Loan Bank, Federal Reserve Bank and other stock	(46)		(127)		(173)		(64)		(168)		(232)		Federal Home Loan Bank, Federal Reserve Bank and other stock	(78)		(101)		(179)
Interest on deposits, investments and other earning assets	Interest on deposits, investments and other earning assets	(96)		(1,273)		(1,369)		(63)		(1,574)		(1,637)		Interest on deposits, investments and other earning assets	(385)		(1,649)		(2,034)
Commercial, financial and agricultural loans	Commercial, financial and agricultural loans	(39)		(3,220)		(3,259)		93		(5,479)		(5,386)		Commercial, financial and agricultural loans	(402)		(1,431)		(1,833)
Paycheck Protection Program loans	Paycheck Protection Program loans	2,128		—		2,128		2,128		—		2,128		Paycheck Protection Program loans	4,524		—		4,524
Real estate—commercial and construction loans	Real estate—commercial and construction loans	—		—		—		7,172		(4,814)		2,358		Real estate—commercial and construction loans	4,781		(4,240)		541
Real estate—residential loans	Real estate—residential loans	722		(1,935)		(1,213)		1,369		(2,942)		(1,573)		Real estate—residential loans	464		(1,643)		(1,179)
Loans to individuals	Loans to individuals	(43)		(140)		(183)		(80)		(214)		(294)		Loans to individuals	(45)		(97)		(142)
Municipal loans and leases	Municipal loans and leases	(455)		127		(328)		(593)		309		(284)		Municipal loans and leases	(765)		30		(735)
Lease financings	Lease financings	163		(30)		133		321		(69)		252		Lease financings	259		(76)		183
Interest and fees on loans and leases	Interest and fees on loans and leases	2,476		(5,198)		(2,722)		10,410		(13,209)		(2,799)		Interest and fees on loans and leases	8,816		(7,457)		1,359
Total interest income	Total interest income	2,380		(6,471)		(4,091)		10,347		(14,783)		(4,436)		Total interest income	8,431		(9,106)		(675)
Interest expense:	Interest expense:													Interest expense:
Interest-bearing checking deposits	Interest-bearing checking deposits	131		(216)		(85)		286		(289)		(3)		Interest-bearing checking deposits	245		(551)		(306)
Money market savings	Money market savings	324		(3,705)		(3,381)		834		(5,060)		(4,226)		Money market savings	429		(2,479)		(2,050)
Regular savings	Regular savings	63		(601)		(538)		91		(651)		(560)		Regular savings	116		(610)		(494)
Time deposits	Time deposits	(534)		(201)		(735)		(747)		—		(747)		Time deposits	(345)		(811)		(1,156)
Interest on time and interest-bearing deposits	Interest on time and interest-bearing deposits	(16)		(4,723)		(4,739)		464		(6,000)		(5,536)		Interest on time and interest-bearing deposits	445		(4,451)		(4,006)
Short-term borrowings	Short-term borrowings	197		(292)		(95)		154		(781)		(627)		Short-term borrowings	(38)		(66)		(104)
Long-term debt	Long-term debt	222		(296)		(74)		339		(388)		(49)		Long-term debt	(261)		(155)		(416)
Subordinated notes	Subordinated notes	3		(58)		(55)		7		(48)		(41)		Subordinated notes	1,103		(85)		1,018
Interest on borrowings	Interest on borrowings	422		(646)		(224)		500		(1,217)		(717)		Interest on borrowings	804		(306)		498
Total interest expense	Total interest expense	406		(5,369)		(4,963)		964		(7,217)		(6,253)		Total interest expense	1,249		(4,757)		(3,508)
Net interest income	Net interest income	$	1,974	$	(1,102)	$	872	$	9,383	$	(7,566)	$	1,817	Net interest income	$	7,182	$	(4,349)	$	2,833

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~~Interest Income~~

~~Three and six months ended June 30, 2020 versus 2019~~

Interest income on a tax-equivalent basis for the three months ended June 30, 2020 was $50.6 million, a decrease of $4.1 million, or 7.5%, from the same period in the prior year. Interest income on a tax-equivalent basis for the six months ended June 30, 2020 was $103.3 million, a decrease of $4.4 million, or 4.1%, from the same period in 2019. The decrease in interest income for the three and six months ended June 30, 2020 was primarily due to the Federal Reserve interest rate reductions of 75 basis points in the third and fourth quarters of 2019 and 150 basis points in the first quarter of 2020, offset by increases in average gross loans and leases held for investment. Purchase accounting accretion had no impact on the rate on interest-earning assets for the three and six months ended June 30, 2020, compared to a favorable impact of one basis point for the three and six months ended June 30, 2019.

~~Interest Expense~~

~~Three and six months ended June 30, 2020 versus 2019~~

Interest expense for the three months ended June 30, 2020 was $6.5 million, a decrease of $5.0 million, or 43.4%, from the same period in 2019. Interest expense for the six months ended June 30, 2020 was $16.0 million, a decrease of $6.3 million, or 28.1%, from the same period in the prior year. Interest expense decreased for the three and six months ended June 30, 2020 primarily due to the Federal Reserve interest rate decreases in 2019 and 2020, offset slightly by growth in average interest-bearing liabilities of $347.9 million and $257.0 million, during the three and six months ended June 30, 2020, respectively.

Provision for Credit Losses

The reversal of the provision for credit losses for the three months ended March 31, 2021 was $11.3 million, of which $12.9 million (after-tax benefit of $10.2 million) was attributable to favorable changes in economic-related assumptions within the Corporation's CECL model partially offset by a reserve increase attributable to loan growth. The provision for credit losses for the three months ended ~~June 30,~~March 31, 2020 was ~~$23.7~~$21.8 million, ~~compared~~of which $20.3 million was attributable to ~~$2.1 million for the same period~~adverse changes in ~~the prior year.~~economic-related assumptions. Net loan and lease charge-offs for the three months ended ~~June 30, 2020~~March 31, 2021 were ~~$3.6 million~~$288 thousand compared to ~~$1.1 million~~$489 thousand for the same period in the prior year. The provision for credit losses for the six months ended June 30, 2020 was $45.6 million compared to $4.8 million for the same period in the prior year. Net loan and lease charge-offs for the six months ended June 30, 2020 were $4.1 million compared to $1.5 million for the same period in the prior year. Refer to the Executive Overview for discussion of the drivers of provision expense for the three and six months ended June 30, 2020 and 2019. Refer to Asset Quality for discussion of the drivers for the increase in charge-offs for the three and six months ended June 30, 2020 and 2019.

~~Table of Contents~~

Noninterest Income

The following table presents noninterest income for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Three Months Ended										Six Months Ended											Three Months Ended
		June 30,						Change						June 30,								Change					March 31,	Change
(Dollars in thousands)	(Dollars in thousands)	2020		2019		Amount		Percent		2020		2019		Amount		Percent		(Dollars in thousands)	2021		2020		Amount		Percent
Trust fee income	Trust fee income	$	1,924	$	2,054	$	(130)	(6.3	%)	$	3,814	$	3,941	$	(127)	(3.2	%)	Trust fee income	$	2,034	$	1,890	$	144	7.6	%
Service charges on deposit accounts	Service charges on deposit accounts	890		1,447		(557)		(38.5)		2,287		2,882		(595)		(20.6)		Service charges on deposit accounts	1,282		1,397		(115)		(8.2)
Investment advisory commission and fee income	Investment advisory commission and fee income	3,540		4,055		(515)		(12.7)		7,795		7,844		(49)		(0.6)		Investment advisory commission and fee income	4,697		4,255		442		10.4
Insurance commission and fee income	Insurance commission and fee income	4,067		3,941		126		3.2		8,799		9,085		(286)		(3.1)		Insurance commission and fee income	4,955		4,732		223		4.7
Other service fee income	Other service fee income	1,488		2,590		(1,102)		(42.5)		3,358		4,857		(1,499)		(30.9)		Other service fee income	2,192		1,870		322		17.2
Bank owned life insurance income	Bank owned life insurance income	732		743		(11)		(1.5)		1,466		1,695		(229)		(13.5)		Bank owned life insurance income	717		734		(17)		(2.3)
Net gain on sales of investment securities	Net gain on sales of investment securities	65		7		58		N/A		760		8		752		N/A		Net gain on sales of investment securities	65		695		(630)		(90.6)
Net gain on mortgage banking activities	Net gain on mortgage banking activities	3,515		796		2,719		N/A		6,259		1,279		4,980		N/A		Net gain on mortgage banking activities	5,938		2,744		3,194		116.4

Other income	Other income	1,779		723		1,056		N/A		1,846		1,062		784		73.8		Other income	1,370		67		1,303		NM
Total noninterest income	Total noninterest income	$	18,000	$	16,356	$	1,644	10.1	%	$	36,384	$	32,653	$	3,731	11.4	%	Total noninterest income	$	23,250	$	18,384	$	4,866	26.5	%

Three ~~and six~~ months ended ~~June 30,~~March 31, 2021 versus 2020 ~~versus 2019~~

Noninterest income for the three months ended ~~June 30, 2020~~March 31, 2021 was ~~$18.0~~$23.3 million, an increase of ~~$1.6~~$4.9 million, or ~~10.1%~~26.5%, from the three months ended ~~June 30, 2019. Noninterest income for the six months ended June 30, 2020 was $36.4 million, an increase of $3.7 million, or 11.4%, from the six months ended June 30, 2019.~~March 31, 2020.

The net gain on mortgage banking activities increased ~~$2.7~~$3.2 million, or ~~341.6%~~116.4%, for the three months ended ~~June 30, 2020~~March 31, 2021 from the comparable period in the prior year due to an increase in volume and ~~$5.0 million,~~an expansion of margins. Investment advisory commission and fee income increased $442 thousand, or ~~389.4%~~10.4%, for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021 from the comparable period in the prior year due to increased assets under management driven by favorable market conditions and new customer relationships.Insurance commission and fee income increased $223 thousand, or 4.7%, for the quarter ended March 31, 2021, primarily due to an increase in ~~mortgage volume~~premiums for group life and health and commercial lines and an ~~expansion~~increase in contingent commission income of ~~margins. Net gain on sales~~$36 thousand, which was $1.1 million for each of ~~investment securities increased $752 thousand for~~ the ~~six months~~quarters ended ~~June 30, 2019 compared to the comparable period for the previous year primarily due to a $652 thousand gain on the sale of $58.3 million of agency backed mortgage backed securities~~March 31, 2021 and 2020. Contingent commission income is largely recognized in the first quarter of ~~2020.~~the year.

Other income increased ~~$1.1~~$1.3 million ~~or 146.1%,~~ for the three months ended ~~June 30, 2020 and $784 thousand, or 73.8%, for the six months ended June 30, 2020 compared to~~March 31, 2021 from the comparable ~~periods for~~period in the ~~previous year. Fees~~prior year primarily due to an increase of $967 thousand in fees on risk participation agreements for interest rate swaps ~~increased $1.3 million for the three months ended June 30, 2020 and $1.2 million for the six months ended June 30, 2020 compared to the comparable periods in the prior year,~~ driven by increased customer activity ~~based on~~due to the current rate environment. Gain on sale of small business administration (SBA) loans decreased $239 thousand for the three months ended June 30, 2020 and $294 thousand for the six months ended June 30, 2020 compared to the comparable periods in the prior year due to decreased SBA loan sale activity. EquityAdditionally, equity securities measured at fair value ~~decreased $40~~increased $384 thousand for the ~~three months ended June 30, 2020 and $312 thousand for the six months ended June 30, 2020.~~

Other service fee income decreased $1.1 million, or 42.5%, for the three months ended June 30, 2020 and $1.5 million, or 30.9%, for the six months ended June 30, 2020 compared to the comparable periods in the prior year. Mortgage servicing rights amortization increased $484 thousand for the three months ended June 30, 2020 and $814 thousand for the six months ended June 30, 2020 compared to the comparable periods in the prior year driven by the decline in interest rates and their impact on prepayment activity. Additionally, valuation allowance adjustments of $283 thousand for the three months ended June 30, 2020 and $338 thousand for the six months ended June 30, 2020 were recorded against mortgage servicing right assets due to a decline in fair value. Interchange income decreased $226 thousand for the three months ended June 30, 2020 and $256 thousand for the six months ended June 30, 2020 compared to the comparable periods in the prior year due to decreased customer activity.quarter.

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Service charges on deposit accounts decreased $557 thousand, or 38.5%, for the three months ended June 30, 2020 and $595 thousand, or 20.6%, for the six months ended June 30, 2020 compared to the comparable periods in the prior year primarily due to the waiving of certain deposit service charges for customers in response to COVID-19.Investment advisory commission and fee income decreased $515 thousand, or 12.7%, for the three months ended June 30, 2020, primarily due to a decline in the value of assets under management due to overall declines in the market, as a majority of investment advisory fees are billed based on the prior quarter-end assets under management balance.

Noninterest Expense

The following table presents noninterest expense for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Three Months Ended										Six Months Ended											Three Months Ended
		June 30,						Change						June 30,								Change					March 31,	Change
(Dollars in thousands)	(Dollars in thousands)	2020		2019		Amount		Percent		2020		2019		Amount		Percent		(Dollars in thousands)	2021		2020		Amount		Percent
Salaries, benefits and commissions	Salaries, benefits and commissions	$	21,700	$	22,052	$	(352)	(1.6	%)	$	45,536	$	43,598	$	1,938	4.4	%	Salaries, benefits and commissions	$	24,780	$	23,836	$	944	4.0	%
Net occupancy	Net occupancy	2,478		2,601		(123)		(4.7)		5,052		5,212		(160)		(3.1)		Net occupancy	2,739		2,574		165		6.4
Equipment	Equipment	923		1,065		(142)		(13.3)		1,918		2,055		(137)		(6.7)		Equipment	946		995		(49)		(4.9)
Data processing	Data processing	2,750		2,627		123		4.7		5,510		5,141		369		7.2		Data processing	3,050		2,760		290		10.5
Professional fees	Professional fees	1,264		1,307		(43)		(3.3)		2,581		2,571		10		0.4		Professional fees	1,748		1,317		431		32.7
Marketing and advertising	Marketing and advertising	535		786		(251)		(31.9)		937		1,326		(389)		(29.3)		Marketing and advertising	280		402		(122)		(30.3)
Deposit insurance premiums	Deposit insurance premiums	615		430		185		43.0		1,119		882		237		26.9		Deposit insurance premiums	636		504		132		26.2
Intangible expenses	Intangible expenses	321		417		(96)		(23.0)		651		843		(192)		(22.8)		Intangible expenses	249		330		(81)		(24.5)

Other expense	Other expense	5,374		5,496		(122)		(2.2)		11,433		10,715		718		6.7		Other expense	5,112		6,059		(947)		(15.6)
Total noninterest expense	Total noninterest expense	$	35,960	$	36,781	$	(821)	(2.2	%)	$	74,737	$	72,343	$	2,394	3.3	%	Total noninterest expense	$	39,540	$	38,777	$	763	2.0	%

Three ~~and six~~ months ended ~~June 30,~~March 31, 2021 versus 2020 ~~versus 2019~~

Noninterest expense for the three months ended ~~June 30, 2020~~March 31, 2021 was ~~$36.0~~$39.5 million, ~~a decrease~~an increase of ~~$821~~$763 thousand, or ~~2.2%~~2.0%, from the three months ended ~~June 30, 2019. Noninterest expense for the six months ended June 30, 2020 was $74.7 million, an increase of $2.4 million, or 3.3%, from the six months ended June 30, 2019.~~March 31, 2020.

Salaries, benefits and commissions ~~decreased $352~~increased $944 thousand, or ~~1.6%~~4.0%, for the three months ended ~~June 30, 2020 and increased $1.9 million, or 4.4%, for the six months ended June 30, 2020 compared to~~March 31, 2021 from the comparable ~~periods~~period in the prior ~~year. The increase for the six months ended June 30, 2020 was~~year, primarily attributable to additional staff hired ~~primarily during 2019,~~ to support revenue generation across all business lines, ~~expansion of our commercial lending groups in the first and second quarter of 2019,~~ annual merit increases and increased variable compensation due to strong ~~mortgage banking activity.~~pre-tax pre-provision income during the first quarter of 2021. The ~~decrease~~increases in salaries, benefits and commissions were offset by $582 thousand of incremental capitalized compensation related to the origination of PPP loans. Professional fees increased $431 thousand, or 32.7%, for the three months ended ~~June 30, 2020 was~~March 31, 2021 from the ~~result~~comparable period in the prior year primarily attributable to increased consultant fees in support of ~~$1.3 million in compensation capitalized due to PPP loan originations which offset the previously discussed increases. Other expense~~our Diversity, Equity and Inclusion and training initiatives. Data processing expenses increased ~~$718~~$290 thousand, or ~~6.7%~~10.5%, for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 from the comparable period in the prior year primarily due to continued investments in customer relationship management software, internal infrastructure improvements and outsourced data processing solutions. Deposit insurance premiums increased $132 thousand, or 26.2%, for the three months ended March 31, 2021 from the comparable period in the prior year primarily due to an increased assessment base due to asset growth.

Other expense decreased $947 thousand, or 15.6%, for the three months ended March 31, 2021 from the comparable period in the prior year primarily due to a ~~one-time~~ $656 thousand charge related to the extinguishment of long-term debt that occurred in the first quarter of ~~2020. Marketing~~2020 and ~~advertising expense decreased $251~~a $295 thousand ~~or 31.9%, for the quarter~~decrease in travel and ~~decreased $389 thousand, or 29.3%, for the six months ended June 30, 2020 compared to the comparable period for the previous year,~~entertainment expenses due to ~~a decrease in advertising activities during the~~ COVID-19 related ~~stay at home orders.~~restrictions.

Tax Provision

The ~~Corporation recognized a tax benefit of $264 thousand~~provision for income taxes for the three months ended ~~June 30,~~March 31, 2021 and 2020 ~~compared to a~~was $7.8 million and $(606) thousand, respectively, at effective tax ~~expense~~rates of ~~$3.7 million for the three months ended June 30, 2019, at an effective rate of (14.5)%~~19.3% and ~~18.2%~~(261.2)%, respectively. The ~~Corporation recognized a~~effective tax ~~benefit of $870 thousand~~rates for the ~~six months~~quarters ended ~~June 30,~~March 31, 2021 and 2020 compared to a tax expense of $7.2 million for the six months ended June 30, 2019, at an effective rate of (42.4)% and 18.0%, respectively, for the six months ended June 30, 2020 and 2019, respectively. The negative effective tax rate for the three and six months ended June 30, 2020 reflectsreflect the benefits of tax-exempt income from investments in municipal securities and loans and leases. The calculation of the effective tax rate for income taxes for the ~~three and six months~~quarter ended ~~June 30,~~March 31, 2020 was based on the actual effective tax rate for the year-to-date period, given the uncertainty of the impact of COVID-19 at the time, and its potential impact on the Corporation’s estimate of the annual effective tax rate. The Corporation's effective income tax rates for the three and six months ended June 30, 2019 was 18.2% and 18.0%, respectively, and reflects the benefits of tax-exempt income from investments in municipal securities and loans and leases and discrete tax benefits.

5947

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Financial Condition

Assets

The following table presents assets at the dates indicated:


		At June 30, 2020		At December 31, 2019		Change							At March 31, 2021		At December 31, 2020		Change
(Dollars in thousands)	(Dollars in thousands)											Amount					At December 31, 2020		Amount	Percent
Cash and interest-earning deposits	Cash and interest-earning deposits	$	348,529	$	125,128	$	223,401	N/A		Cash and interest-earning deposits	$	187,317	$	219,858	$	(32,541)
Investment securities, net of allowance for credit losses	Investment securities, net of allowance for credit losses	397,852		441,599		(43,747)		(9.9)		Investment securities, net of allowance for credit losses	377,506		373,176		4,330		1.2
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	28,192		28,254		(62)		(0.2)		Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	25,571		28,183		(2,612)		(9.3)
Loans held for sale	Loans held for sale	31,082		5,504		25,578		N/A		Loans held for sale	22,636		37,039		(14,403)		(38.9)
Loans and leases held for investment	Loans and leases held for investment	4,951,809		4,386,836		564,973		12.9		Loans and leases held for investment	5,415,006		5,306,841		108,165		2.0
Reserve for credit losses, loans and leases		(86,217)		(35,331)		(50,886)		N/A
Allowance for credit losses, loans and leases										Allowance for credit losses, loans and leases	(71,497)		(83,044)		11,547		13.9
Premises and equipment, net	Premises and equipment, net	55,900		56,676		(776)		(1.4)		Premises and equipment, net	55,650		55,636		14		—
Operating lease right-of-use assets	Operating lease right-of-use assets	34,148		34,418		(270)		(0.8)		Operating lease right-of-use assets	34,317		34,325		(8)		—
Goodwill and other intangibles, net	Goodwill and other intangibles, net	181,657		182,843		(1,186)		(0.6)		Goodwill and other intangibles, net	181,784		181,425		359		0.2
Bank owned life insurance	Bank owned life insurance	116,244		114,778		1,466		1.3		Bank owned life insurance	118,435		117,718		717		0.6
Accrued interest receivable and other assets	Accrued interest receivable and other assets	66,116		40,219		25,897		64.4		Accrued interest receivable and other assets	69,940		65,339		4,601		7.0
Total assets	Total assets	$	6,125,312	$	5,380,924	$	744,388	13.8	%	Total assets	$	6,416,665	$	6,336,496	$	80,169	1.3	%

Cash and Interest-Earning Deposits

Cash and interest-earning deposits ~~increased $223.4~~decreased $32.5 million, or ~~178.5%~~14.8%, from December 31, ~~2019,~~2020, primarily due to ~~increased~~decreased cash letters of $24.1 million and decreased interest earning deposits at the Federal Reserve Bank of ~~$217.1~~$8.1 million.

Investment Securities

Total investments securities at ~~June 30, 2020 decreased $43.7~~March 31, 2021 increased $4.3 million, or 1.2%, from December 31, ~~2019. Sales~~2020. Purchases of ~~$70.5~~$39.3 million, maturities and pay-downs of $43.8 million, calls of $18.9 million, a provision for credit losses of $855 thousand and net amortization of purchased premiums and discounts of $1.1 million were partially offset by purchases of $88.6 million and increases in the fair value of available-for-sale investment securities of ~~$2.3 million. The increase in the fair value~~$1.7 million and a reversal of ~~available-for-sale investment securities was due to the decrease in interest rates~~provision for credit losses of $384 thousand were partially offset by maturities and ~~the flattening~~pay-downs of ~~the yield curve.~~$29.6 million, sales of $3.6 million, calls of $3.3 million and net amortization of purchased premiums and discounts of $806 thousand.

Loans and Leases

Gross loans and leases held for investment increased ~~$565.0~~$108.2 million, or ~~12.9%~~2.0%, from December 31, ~~2019.~~2020. The ~~growth in loans was primarily related to PPP loan originations of $499.0 million. The remaining~~ growth in gross loans and leases held for investment ~~of $66.0 million~~ was ~~primarily related~~due to increases in commercial real estate loans ~~offset by a decrease in commercial line utilization~~ of ~~$89.5~~$72.8 million and PPP loan increases of $44.7 million.

Asset Quality

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

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

At ~~June 30, 2020,~~March 31, 2021, nonaccrual loans and leases and accruing troubled debt restructured loans were ~~$26.2~~$30.0 million and had a related allowance for credit losses on loans and leases of ~~$1.1 million.~~$281 thousand. At December 31, ~~2019,~~2020, nonaccrual loans and leases ~~that~~and accruing troubled debt restructured loans were ~~considered to be impaired was $38.4 million. The~~$31.7 million and had a related ~~reserve~~allowance for ~~loan~~credit losses ~~was $2.1 million.~~on loans and leases of $585 thousand. Individual reserves have

~~Table of Contents~~

been established based on current facts and management's judgements about the ultimate outcome of these ~~credits.~~credits, including the most recent known data available on any related underlying collateral and

the borrower's cash flows. During the first quarter of ~~2020,~~2021, three ~~residential~~commercial real estate loans to one borrower totaling ~~$710 thousand and two home equity loans totaling $741~~$126 thousand were returned to accruing status as these loans have maintained a period of repayment performance in accordance with the Corporation's policy. The second quarter of 2020 included a charge-off of $2.7 million and provision for credit losses of $1.3 million related to one commercial real estate loan, which was transferred from nonaccrual loans to other real estate owned. As of June 30, 2020, the property was carried at $8.1 million, in other real estate owned, based on a letter of intent to sell the property. The amount of the individual reserve needed for these credits could change in future periods subject to changes in facts and judgments related to these credits.

Other real estate owned was ~~$8.6~~$7.5 million and ~~$516 thousand~~$7.4 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. ~~The increase of $8.1 million is related to commercial real estate loan discussed above.~~

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

The following table details information pertaining to the Corporation’s nonperforming assets at the dates indicated.


(Dollars in thousands)	(Dollars in thousands)	At June 30, 2020			At December 31, 2019			(Dollars in thousands)	At March 31, 2021			At December 31, 2020
Nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*:	Nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*:							Nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*:

Commercial, financial and agricultural	Commercial, financial and agricultural	$	4,208		$	3,442		Commercial, financial and agricultural	$	2,006		$	2,827
Real estate—commercial	Real estate—commercial	17,568			27,928			Real estate—commercial	22,026			22,739
Real estate—construction		—			257

Real estate—residential	Real estate—residential	3,999			6,445			Real estate—residential	5,815			5,919

Lease financings	Lease financings	366			506			Lease financings	149			207
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*	Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*	26,141			38,578			Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*	29,996			31,692
Accruing troubled debt restructured loans and lease modifications not included in the above	Accruing troubled debt restructured loans and lease modifications not included in the above	53			54			Accruing troubled debt restructured loans and lease modifications not included in the above	52			53
Accruing loans and leases 90 days or more past due:	Accruing loans and leases 90 days or more past due:							Accruing loans and leases 90 days or more past due:
Commercial, financial and agricultural	Commercial, financial and agricultural	309			20			Commercial, financial and agricultural	40			50
Real estate—commercial	Real estate—commercial	54			—			Real estate—commercial	—			945

Real estate—residential	Real estate—residential	468			—			Real estate—residential	403			—
Loans to individuals	Loans to individuals	93			74			Loans to individuals	123			185
Lease financings	Lease financings	269			49			Lease financings	98			212
Total accruing loans and leases, 90 days or more past due	Total accruing loans and leases, 90 days or more past due	1,193			143			Total accruing loans and leases, 90 days or more past due	664			1,392
Total nonperforming loans and leases	Total nonperforming loans and leases	27,387			38,775			Total nonperforming loans and leases	30,712			33,137
Other real estate owned	Other real estate owned	8,642			516			Other real estate owned	7,481			7,355
Total nonperforming assets	Total nonperforming assets	$	36,029		$	39,291		Total nonperforming assets	$	38,193		$	40,492
Nonaccrual loans and leases (including nonaccrual troubled debt restructured loans and lease modifications) / loans and leases held for investment	Nonaccrual loans and leases (including nonaccrual troubled debt restructured loans and lease modifications) / loans and leases held for investment	0.53		%	0.88		%	Nonaccrual loans and leases (including nonaccrual troubled debt restructured loans and lease modifications) / loans and leases held for investment	0.55		%	0.60		%
Nonperforming loans and leases / loans and leases held for investment	Nonperforming loans and leases / loans and leases held for investment	0.55		%	0.88		%	Nonperforming loans and leases / loans and leases held for investment	0.57		%	0.62		%
Nonperforming assets / total assets	Nonperforming assets / total assets	0.59		%	0.73		%	Nonperforming assets / total assets	0.60		%	0.64		%

Allowance for credit losses, loans and leases	Allowance for credit losses, loans and leases	$	86,217		$	35,331		Allowance for credit losses, loans and leases	$	71,497		$	83,044
Allowance for credit losses, loans and leases / loans and leases held for investment	Allowance for credit losses, loans and leases / loans and leases held for investment	1.74		%	0.81		%	Allowance for credit losses, loans and leases / loans and leases held for investment	1.32		%	1.56		%
Allowance for credit losses, loans and leases / nonaccrual loans and leases held for investment	Allowance for credit losses, loans and leases / nonaccrual loans and leases held for investment	329.82		%	91.58		%	Allowance for credit losses, loans and leases / nonaccrual loans and leases held for investment	238.36		%	262.03		%
Allowance for credit losses, loans and leases / nonperforming loans and leases held for investment	Allowance for credit losses, loans and leases / nonperforming loans and leases held for investment	314.81		%	91.12		%	Allowance for credit losses, loans and leases / nonperforming loans and leases held for investment	232.80		%	250.61		%

* Nonaccrual troubled debt restructured loans and lease modifications included in nonaccrual loans and leases in the above table	* Nonaccrual troubled debt restructured loans and lease modifications included in nonaccrual loans and leases in the above table	$	14,103		$	13,817		* Nonaccrual troubled debt restructured loans and lease modifications included in nonaccrual loans and leases in the above table	$	13,520		$	14,069

~~Table of Contents~~

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


(Dollars in thousands)	(Dollars in thousands)	At June 30, 2020		At December 31, 2019		(Dollars in thousands)	At March 31, 2021		At December 31, 2020
Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications	Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications	$	26,141	$	38,578	Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications	$	29,996	$	31,692
Nonaccrual loans and leases with partial charge-offs	Nonaccrual loans and leases with partial charge-offs	3,496		1,966		Nonaccrual loans and leases with partial charge-offs	4,676		4,227
Life-to-date partial charge-offs on nonaccrual loans and leases	Life-to-date partial charge-offs on nonaccrual loans and leases	2,022		1,320		Life-to-date partial charge-offs on nonaccrual loans and leases	1,761		2,377
Specific reserves on individually analyzed loans	Specific reserves on individually analyzed loans	1,135		2,108		Specific reserves on individually analyzed loans	281		585

Reporting for Financial Institutions Working with ~~Customer~~Customers Affected by the Coronavirus~~. Accordingly,~~ and have not categorized these ~~loans and leases were not categorized~~modifications as troubled debt restructurings. As of March 31, 2021, there were approximately 54 loan and lease modifications outstanding with principal balances totaling $73.0 million. As of December 31, 2020, there were approximately 72 loan modifications outstanding with principal balances totaling $68.0 million.

Table 4—Loan Concentration

The following table provides summarized detail related to outstanding commercial loan balances, excluding ~~PPP loans, segmented by industry description,~~ PPP loans, segmented by industry description, and certain loan modifications segmented by industry description for commercial loans and segmented by loan category for other loan types as of ~~June 30, 2020:~~March 31, 2021:

(Dollars in thousands)
Industry Description Total Outstanding Balance (excl PPP) % of Commercial Loan Portfolio PPP $ (1) % of Portfolio with PPP Loans (2) $ Balance of Modified Loans (3) Modified Loans as a % of Portfolio (3)
CRE - Retail $ 260,744 7.1 % $ 239 — % $ 124,614 47.8 %
Animal Production 240,335 6.6 706 2.1 20,738 8.6
CRE - 1-4 Family Residential Investment 238,667 6.5 1,282 0.2 26,902 11.3
CRE - Office 208,000 5.7 — — 16,394 7.9
CRE - Multi-family 182,347 5.0 — — 11,774 6.5
Hotels & Motels (Accommodation) 171,688 4.7 2,407 50.4 146,547 85.4
Nursing and Residential Care Facilities 155,355 4.3 7,935 27.4 — —
CRE - Industrial / Warehouse 125,439 3.5 139 4.8 26,316 21.0
Real Estate Lenders, Secondary Market Financing 116,928 3.2 4,258 18.6 49 —
Specialty Trade Contractors 114,662 3.2 66,880 15.3 6,043 5.3
CRE - Mixed-Use - Residential 107,243 3.0 — — 34,476 32.1
Professional, Scientific, and Technical Services 100,365 2.8 70,035 30.4 11,600 11.6
Homebuilding (tract developers, remodelers) 91,095 2.5 15,034 6.7 3,330 3.7
Education 89,894 2.5 15,577 39.8 6,651 7.4
Merchant Wholesalers, Durable Goods 71,690 2.0 20,726 21.0 9,690 13.5
Fabricated Metal Product Manufacturing 68,364 1.9 12,895 3.7 6,084 8.9
Crop Production 61,866 1.7 284 0.6 3,199 5.2
Food Services and Drinking Places 61,118 1.7 15,933 25.5 33,939 55.5
CRE - Medical Office 59,751 1.6 — — 14,732 24.7
Administrative and Support Services 54,447 1.5 28,777 33.0 1,557 2.9
Motor Vehicle and Parts Dealers 51,774 1.4 11,623 5.5 18,026 34.8
Food Manufacturing 51,016 1.4 2,985 1.4 17,535 34.4
Total Commercial Loans >$50M $ 2,682,788 73.8 % $ 277,715 11.6 % $ 540,196 20.1 %
Industries with <$50 million in outstandings $ 951,019 26.2 % $ 221,263 19.2 % $ 126,200 13.3 %
Total Commercial Loans $ 3,633,807 100.0 % $ 498,978 13.6 % $ 666,396 18.3 %
Consumer Loans and Lease Financings Total Outstanding Balance PPP $ (1) $ Balance of Modified Loans (3) Modified Loans as a % of Portfolio (3)
Real Estate-Residential Secured for Personal Purpose $ 462,512 — $ 35,525 7.7 %
Real Estate-Home Equity Secured for Personal Purpose 173,041 — 4,077 2.4
Loans to Individuals 29,222 — 486 1.7
Lease Financings 154,249 — 13,633 8.8
Total Consumer Loans and Lease Financings $ 819,024 $ — $ 53,721 6.6 %
Total $ 4,452,831 $ 498,978 $ 720,117 16.2 %

~~(1) Includes ($11.0) million of net deferred fees.~~

~~(2) Represents weighted average percent of the portfolio which received a PPP loan.~~


(Dollars in thousands)	As of March 31, 2021
Industry Description	Total Outstanding Balance (excl PPP)		% of Commercial Loan Portfolio		$ Balance of Modified Loans (1)		Modified Loans as a % of Portfolio (excl PPP) (1)
CRE - Retail	$	356,690	8.8	%	$	—	—	%
Animal Production	269,608		6.7		27		—
CRE - Office	247,320		6.1		—		—
CRE - 1-4 Family Residential Investment	246,643		6.1		1,097		0.4
CRE - Multi-family	213,065		5.3		—		—
CRE - Industrial / Warehouse	180,254		4.5		738		0.4
Hotels & Motels (Accommodation)	174,751		4.3		35,222		20.2
Education	155,589		3.9		2,638		1.7
Nursing and Residential Care Facilities	152,016		3.8		—		—
CRE - Mixed-Use - Residential	120,629		3.0		3,530		2.9
Specialty Trade Contractors	117,204		2.9		85		0.1
Real Estate Lenders, Secondary Market Financing	106,027		2.6		12		—
CRE - Medical Office	93,834		2.3		—		—
Homebuilding (tract developers, remodelers)	81,879		2.0		—		—
Merchant Wholesalers, Durable Goods	73,063		1.8		—		—
Crop Production	69,853		1.7		—		—
Motor Vehicle and Parts Dealers	65,839		1.6		—		—
Rental and Leasing Services	61,096		1.5		—		—
Fabricated Metal Product Manufacturing	60,472		1.5		—		—
Administrative and Support Services	58,298		1.4		101		0.2
Wood Product Manufacturing	57,180		1.4		—		—
Food Services and Drinking Places	53,168		1.3		3,300		6.2
Industries with >$50 million in outstandings	$	3,014,478	74.5	%	$	46,750	1.6	%
Industries with <$50 million in outstandings	$	1,026,671	25.5	%	$	24,277	2.4	%
Total Commercial Loans	$	4,041,149	100.0	%	$	71,027	1.8	%

Consumer Loans and Lease Financings	Total Outstanding Balance				$ Balance of Modified Loans (1)		Modified Loans as a % of Portfolio (excl PPP) (1)
Real Estate-Residential Secured for Personal Purpose	$	494,349			$	1,712	0.3	%
Real Estate-Home Equity Secured for Personal Purpose	162,529				84		0.1
Loans to Individuals	25,468				—		—
Lease Financings	163,059				212		0.1
Total Consumer Loans and Lease Financings	$	845,405			$	2,008	0.2	%

Total	$	4,886,554			$	73,035	1.5	%

~~(3)~~(1) Loan modifications referenced above were made in accordance with Section 4013 of the CARES Act, the Consolidated Appropriations Act, 2021 and the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus and therefore were not classified as ~~TDRs..~~TDRs as of March 31, 2021.

~~Table of Contents~~

Goodwill and Other Intangible Assets

Goodwill and other intangible assets have been recorded on the books of the Corporation in connection with acquisitions. The Corporation has core deposit and customer-related intangibles and servicing rights, which are not deemed to have an indefinite life and therefore will continue to be amortized over their useful life using the present value of projected cash flows. The amortization of intangible assets was ~~$1.2~~$1.0 million and ~~$835~~$982 thousand for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. The amortization of intangible assets was $2.2 million and $1.6 million for the six months ended June 30, 2020 and 2019,~~ respectively. See Note 5 to the Condensed Unaudited Consolidated Financial Statements, "Goodwill and Other Intangible Assets," for a summary of intangible assets at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

The Corporation also has goodwill with a net carrying value of $172.6 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, which is deemed to be an indefinite intangible asset and is not amortized. The Corporation completes a goodwill impairment analysis ~~at least~~ on an annual basis, or more often if events and circumstances indicate that there may be impairment. The Corporation also completes an impairment test for other identifiable intangible assets on an annual basis or more often if events and circumstances indicate there may be impairment. There was no impairment of goodwill or identifiable intangibles during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020. There can be no assurance that future impairment assessments or tests will not result in a charge to earnings.

Liabilities

The following table presents liabilities at the dates indicated:


(Dollars in thousands)	(Dollars in thousands)	At June 30, 2020		At December 31, 2019		Change							(Dollars in thousands)	At March 31, 2021		At December 31, 2020		Change
																				At December 31, 2020	Amount	Percent
Deposits	Deposits	$	4,869,329	$	4,360,075	$	509,254	11.7	%	Deposits	$	5,311,592		$	5,242,715	$	68,877
Short-term borrowings	Short-term borrowings	210,780		18,680		192,100		N/A		Short-term borrowings	26,676			17,906		8,770		49.0
Long-term debt	Long-term debt	210,039		150,098		59,941		39.9		Long-term debt	95,000			110,000		(15,000)		(13.6)
Subordinated notes	Subordinated notes	94,903		94,818		85		0.1		Subordinated notes	173,617			183,515		(9,898)		(5.4)
Operating lease liabilities	Operating lease liabilities	37,427		37,617		(190)		(0.5)		Operating lease liabilities	37,737			37,690		47		0.1
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	47,961		44,514		3,447		7.7		Accrued interest payable and other liabilities	49,588			52,198		(2,610)		(5.0)
Total liabilities	Total liabilities	$	5,470,439	$	4,705,802	$	764,637	16.2	%	Total liabilities	$	5,694,210		$	5,644,024	$	50,186	0.9	%

Deposits

Total deposits increased ~~$509.3~~$68.9 million, or ~~11.7%~~1.3%, from December 31, ~~2019,~~2020, primarily due to increases in consumer and commercial ~~and consumer~~ deposits ~~partially~~ offset by a ~~seasonal~~ decrease in public funds and brokered deposits.

Borrowings

Total borrowings ~~increased $252.1~~decreased $16.1 million, or ~~95.6%~~5.2%, from December 31, ~~2019,~~2020. Long-term debt decreased $15.0 million primarily due to maturities of FHLB advances and subordinated notes decreased $9.8 million primarily due to a $10.0 million redemption of previously issued subordinated notes. These decreases were partially offset by an $8.8 million increase in short-term borrowings of $192.1 million, of which $182.5 million which represents borrowings from the Federal Reserve Bank under the PPPLF, and an increase of $59.9 million in long-term borrowings, primarily due to an increase in long-term FHLB borrowings to fund future loan growth. A portion of the borrowings under the PPPLF were used to fund PPP loans originated during the year.customer repurchase agreements.

Other ~~liabilities~~Liabilities

The Corporation maintains a reserve in other liabilities for off-balance sheet credit exposures that currently are unfunded in categories with historical loss experience. The reserve for these off-balance sheet credits was ~~$4.6~~$2.5 million and ~~$420 thousand~~$2.4 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively, of~~2020, respectively. The increase was due to lower line utilization, which ~~$4.1 million was related to CECL. Refer to the Executive Overview for discussion of the increase of $4.1 million.~~results in higher potential funding amounts.

~~Table of Contents~~

Shareholders’ Equity

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


(Dollars in thousands)	(Dollars in thousands)	At June 30, 2020		At December 31, 2019		Change							(Dollars in thousands)	At March 31, 2021		At December 31, 2020		Change
																				At December 31, 2020	Amount	Percent
Common stock	Common stock	$	157,784	$	157,784	$	—	—	%	Common stock	$	157,784		$	157,784	$	—
Additional paid-in capital	Additional paid-in capital	296,028		294,999		1,029		0.3		Additional paid-in capital	296,177			296,186		(9)		—
Retained earnings	Retained earnings	268,751		288,803		(20,052)		(6.9)		Retained earnings	333,581			306,899		26,682		8.7
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(19,807)		(21,730)		1,923		(8.8)		Accumulated other comprehensive loss	(20,440)			(22,144)		1,704		(7.7)
Treasury stock	Treasury stock	(47,883)		(44,734)		(3,149)		7.0		Treasury stock	(44,647)			(46,253)		1,606		(3.5)
Total shareholders’ equity	Total shareholders’ equity	$	654,873	$	675,122	$	(20,249)	(3.0	%)	Total shareholders’ equity	$	722,455		$	692,472	$	29,983	4.3	%

Total shareholders' equity ~~decreased $20.2~~increased $30.0 million, or ~~3.0%~~4.3%, from December 31, ~~2019.~~2020. Retained earnings at ~~June 30, 2020 decreased~~March 31, 2021 increased by ~~$11.3~~$26.7 million ~~upon adoption~~primarily due to net income of ~~CECL and~~$32.6 million offset by ~~$11.7~~$5.9 million ~~due to~~of cash dividends declared ~~which were partially offset by the net income of $2.9 million~~and paid for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021. Accumulated other comprehensive loss decreased by ~~$1.9~~$1.7 million mainly

attributable to increases in the fair value of available-for-sale investment securities of ~~$1.8~~$1.4 million, net of tax. Treasury stock ~~increased $3.1~~decreased $1.6 million from December 31, ~~2019~~2020 primarily ~~related~~due to ~~purchases of $4.0 million under the Corporation's share repurchase program offset by $1.3 million of~~ stock issued under dividend reinvestment and employee stock purchase ~~plans.~~plans and stock-based incentive plan activity.

Discussion of Segments

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

The Banking segment reported pre-tax income of ~~$990 thousand~~$40.0 million and ~~$19.8~~pre-tax loss of $1.5 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively and pre-tax loss of $538 thousand and pre-tax income $37.1 million for the six months ended June 30, 2020 and 2019,~~ respectively. See the section of this MD&A under the ~~heading “Net~~headings "Net Interest Income", ~~“Interest Income”~~"Interest Income", ~~“Interest Expense”~~"Interest Expense", and ~~“Provision~~"Provision for Credit ~~Losses”~~Losses" for a discussion of the Banking Segment.

The Wealth Management segment reported pre-tax income of ~~$1.6~~$2.4 million and ~~$2.1~~$1.9 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $3.5 million and $3.8 million for the six months ended June 30, 2020 and 2019,~~ respectively. Noninterest income was ~~$5.5~~$6.8 million and $6.2 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $11.7 million and $11.9 million for the six months ended June 30, 2020 and 2019,~~ respectively. The ~~decrease~~increase in pre-tax income and noninterest income for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 compared to the three ~~and six~~ months ended ~~June 30, 2019~~March 31, 2020 was primarily due to ~~a decline in the value~~appreciation of assets under management and supervision, as a majority of investment advisory fees are billed based on the prior quarter-end assets under management and supervision balance. Assets under management and supervision were ~~$3.6~~$4.2 billion as of ~~June 30,~~March 31, 2021, $4.1 billion as of December 31, 2020, ~~$3.2~~$3.3 billion as of March 31, 2020 and $3.8 billion as of December 31, ~~2019, $3.7 billion as of June 30, 2019 and $3.6 billion as of March 31,~~ 2019. The ~~decrease~~increase in assets under management and supervision of ~~$193.3~~$116.1 million for the period from December 31, ~~2019~~2020 to ~~June 30,~~March 31, 2021 and $926.7 million for the period from March 31, 2020 to March 31, 2021 was primarily due to the general ~~downturn~~improvement in the equity markets ~~driven by the impact of COVID-19.~~and new customer relationships.

The Insurance segment reported pre-tax income of ~~$1.2~~$1.6 million ~~and $860 thousand~~ for both the three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019, respectively, and $2.7 million and $2.9 million for the six months ended June 30, 2020 and 2019, respectively.~~2020. Noninterest income was ~~$4.2~~$5.1 million and ~~$4.1~~$4.9 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $9.1 million and $9.5 million for the six months ended June 30, 2020 and 2019,~~ respectively. The increase in ~~pre-tax income and~~ noninterest income for the three months ended ~~June 30, 2020~~March 31, 2021 was primarily due to an increase in ~~contingent commission income, which was $175~~insurance commissions of $127 thousand ~~and $43 thousand for~~compared to the ~~three months ended June 30, 2020 and 2019, respectively. The decrease~~same period in ~~pre-tax income and noninterest income for~~ the ~~six months ended June 30, 2020 was primarily due to a decrease in contingent commission income, which was $1.3 million and $1.5 million for the six months ended June 30, 2020 and 2019, respectively.~~prior year.

~~Table of Contents~~

Capital Adequacy

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

Under current rules, in order to avoid limitations on capital distributions (including dividend payments and certain discretionary bonus payments to executive officers), a banking organization must hold a capital conservation buffer comprised of common equity Tier 1 capital above its minimum risk-based capital requirements in an amount greater than ~~2.5%~~2.50% of total risk-weighted assets. The Corporation's and Bank's intent is to maintain capital levels in excess of the capital conservation buffer, which requires Tier 1 Capital to Risk Weighted Assets to exceed 8.50% and Total Capital to Risk Weighted Assets to exceed 10.50%. The Corporation and the Bank were in compliance with these requirements at ~~June 30, 2020.~~March 31, 2021.

Table 5—Regulatory Capital

The Corporation's and Bank's actual and required capital ratios as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 under regulatory capital rules were as follows.


		Actual						For Capital Adequacy Purposes								To Be Well-Capitalized Under Prompt Corrective Action Provisions					Actual				For Capital Adequacy Purposes		To Be Well-Capitalized Under Prompt Corrective Action Provisions
(Dollars in thousands)	(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio		(Dollars in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
At June 30, 2020
At March 31, 2021														At March 31, 2021
Total Capital (to Risk-Weighted Assets):	Total Capital (to Risk-Weighted Assets):													Total Capital (to Risk-Weighted Assets):
Corporation	Corporation	$	670,377	13.72	%	$	390,988	8.00	%	$	488,736	10.00	%	Corporation	$	804,632	15.13	%	$	425,322	8.00	%	$	531,653	10.00	%
Bank	Bank	585,816		12.04		389,338		8.00		486,672		10.00		Bank	634,728		11.98		423,859		8.00		529,824		10.00
Tier 1 Capital (to Risk-Weighted Assets):	Tier 1 Capital (to Risk-Weighted Assets):													Tier 1 Capital (to Risk-Weighted Assets):
Corporation	Corporation	524,316		10.73		293,241		6.00		390,988		8.00		Corporation	589,084		11.08		318,992		6.00		425,322		8.00
Bank	Bank	524,913		10.79		292,003		6.00		389,338		8.00		Bank	580,797		10.96		317,894		6.00		423,859		8.00
Tier 1 Common Capital (to Risk-Weighted Assets):	Tier 1 Common Capital (to Risk-Weighted Assets):													Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation	Corporation	524,316		10.73		219,931		4.50		317,678		6.50		Corporation	589,084		11.08		239,244		4.50		345,575		6.50
Bank	Bank	524,913		10.79		219,002		4.50		316,337		6.50		Bank	580,797		10.96		238,421		4.50		344,386		6.50
Tier 1 Capital (to Average Assets):	Tier 1 Capital (to Average Assets):													Tier 1 Capital (to Average Assets):
Corporation	Corporation	524,316		9.15		229,093		4.00		286,367		5.00		Corporation	589,084		9.45		249,290		4.00		311,612		5.00
Bank	Bank	524,913		9.20		228,256		4.00		285,321		5.00		Bank	580,797		9.35		248,556		4.00		310,695		5.00
At December 31, 2019
At December 31, 2020														At December 31, 2020
Total Capital (to Risk-Weighted Assets):	Total Capital (to Risk-Weighted Assets):													Total Capital (to Risk-Weighted Assets):
Corporation	Corporation	$	655,010	13.78	%	$	380,276	8.00	%	$	475,344	10.00	%	Corporation	$	801,368	15.31	%	$	418,811	8.00	%	$	523,513	10.00	%
Bank	Bank	552,142		11.66		378,724		8.00		473,405		10.00		Bank	632,183		12.12		417,416		8.00		521,769		10.00
Tier 1 Capital (to Risk-Weighted Assets):	Tier 1 Capital (to Risk-Weighted Assets):													Tier 1 Capital (to Risk-Weighted Assets):
Corporation	Corporation	524,137		11.03		285,207		6.00		380,276		8.00		Corporation	563,491		10.76		314,108		6.00		418,811		8.00
Bank	Bank	516,087		10.90		284,043		6.00		378,724		8.00		Bank	569,821		10.92		313,062		6.00		417,416		8.00
Tier 1 Common Capital (to Risk-Weighted Assets):	Tier 1 Common Capital (to Risk-Weighted Assets):													Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation	Corporation	524,137		11.03		213,905		4.50		308,974		6.50		Corporation	563,491		10.76		235,581		4.50		340,284		6.50
Bank	Bank	516,087		10.90		213,032		4.50		307,713		6.50		Bank	569,821		10.92		234,796		4.50		339,150		6.50
Tier 1 Capital (to Average Assets):	Tier 1 Capital (to Average Assets):													Tier 1 Capital (to Average Assets):
Corporation	Corporation	524,137		10.02		209,330		4.00		261,663		5.00		Corporation	563,491		9.08		248,224		4.00		310,280		5.00
Bank	Bank	516,087		9.90		208,589		4.00		260,737		5.00		Bank	569,821		9.21		247,494		4.00		309,368		5.00

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, management believes that the Corporation and the Bank continued to meet all capital adequacy requirements to which they are subject. At ~~June 30, 2020,~~March 31, 2021, the Bank is categorized as ~~“well capitalized”~~"well capitalized" under the regulatory framework for prompt corrective action. There are no conditions or events since that ~~notification that~~ management believes have changed the Bank’s category.

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In December 2018, the Federal Reserve announced that a banking organization that experiences a reduction in retained earnings due to the CECL adoption as of the beginning of the fiscal year in which CECL is adopted may elect to phase in the regulatory capital impact of adopting CECL. Transitional amounts are calculated for the following items: retained earnings, temporary difference deferred tax assets and credit loss allowances eligible for inclusion in regulatory capital. When calculating regulatory capital ratios, 25% of the transitional amounts are phased in during the first year. An additional 25% of the transitional amounts are phased in over each of the next two years and at the beginning of the fourth year, the day-one effects of CECL are completely reflected in regulatory capital.

Additionally, in March 2020, the Office of the Comptroller of the Currency, Treasury, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation announced the 2020 CECL interim final rule (IFR) designed to allow eligible firms to better focus on supporting lending to creditworthy households and businesses in light of recent strains on the U.S. economy as a result of the coronavirus (COVID-19). The 2020 CECL IFR allows Corporations that ~~adopt~~adopted CECL before December 31, 2020 to defer 100 percent of the day one transitional amounts described above through

December 31, 2021 for regulatory capital purposes. Additionally, the 2020 CECL IFR allows electing firms to defer through December 31, 2021 the approximate portion of the post day-one allowance attributable to CECL relative to the incurred loss methodology. This is calculated by applying a 25% scaling factor to the CECL provision.

The Corporation adopted the transition guidance and the 2020 CECL IFR relief and applied these effects to regulatory capital. ~~See Note 1, "Summary of Significant Accounting Policies" for additional information on the adoption of CECL.~~

Asset/Liability Management

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

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

Liquidity

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

Sources of Funds

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

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

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Cash Requirements

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

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

Recent Accounting Pronouncements

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

Recent Regulatory and Legislative Developments

~~Interagency Statement on Loan Modifications~~Coronavirus Response and ~~Reporting for Financial Institutions Working with Customers Affected by the Coronavirus~~Relief Supplemental Appropriations Act of 2021

On ~~March 22,~~December 27, 2020, the federal banking agencies issued an interagency statement to provide additional guidance to financial institutions who are working with borrowers affected by COVID-19. The statement provided that agencies will not criticize institutions for working with borrowersCoronavirus Response and ~~will not direct supervised institutions to automatically categorize all COVID-19 related loan modifications as troubled debt restructurings (“TDRs”). The agencies have confirmed with staff~~Relief Supplemental Appropriations Act of the Financial Accounting Standards Board that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

The statement further provided that working with borrowers that are current on existing loans, either individually or as part of a program for creditworthy borrowers who are experiencing short-term financial or operational problems as a result of COVID-19, generally would not be considered TDRs. For modification programs designed to provide temporary relief for current borrowers affected by COVID-19, financial institutions may presume that borrowers that are current on payments are not experiencing financial difficulties at the time of the modification for purposes of determining TDR status, and thus no further TDR analysis is required for each loan modification in the program.

The statement indicated that the agencies’ examiners will exercise judgment in reviewing loan modifications, including TDRs, and will not automatically adversely risk rate credits that are affected by COVID-19, including those considered TDRs.

In addition, the statement noted that efforts to work with borrowers of one- to-four family residential mortgages, where the loans are prudently underwritten, and not past due or carried on non-accrual status, will not result in the loans being considered restructured or modified for the purposes of their risk-based capital rules. With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to COVID-19 as past due because of the deferral.

~~The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”)~~

The CARES Act, which became law on March 27, 2020, provided over $2 trillion to combat the coronavirus (COVID-19) and stimulate the economy. The law had several provisions relevant to financial institutions, including:

•Allowing institutions not to characterize loan modifications relating to the COVID-19 pandemic as a troubled debt restructuring and also allowing them to suspend the corresponding impairment determination for accounting purposes.

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•An option to delay the implementation of the accounting standard for current expected credit losses (CECL) until the earlier of December 31, 2020 or when the President declares that the coronavirus emergency is terminated.

•The ability of a borrower of a federally backed mortgage loan (VA, FHA, USDA, Freddie and Fannie) experiencing financial hardship due, directly or indirectly, to the COVID-19 pandemic to request forbearance from paying their mortgage by submitting a request to the borrower’s servicer affirming their financial hardship during the COVID-19 emergency. Such a forbearance will be granted for up to 180 days, which can be extended for an additional 180-day period upon the request of the borrower. During that time, no fees, penalties or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the mortgage contract will accrue on the borrower’s account. Except for vacant or abandoned property, the servicer of a federally backed mortgage is prohibited from taking any foreclosure action, including any eviction or sale action, for not less than the 60-day period beginning March 18, 2020.

•The ability of a borrower of a multi-family federally backed mortgage loan that was current as of February 1, 2020, to submit a request for forbearance to the borrower’s servicer affirming that the borrower is experiencing financial hardship during the COVID-19 emergency. A forbearance will be granted for up to 30 days, which can be extended for up to two additional 30-day periods upon the request of the borrower. During the time of the forbearance, the multi-family borrower cannot evict or initiate the eviction of a tenant or charge any late fees, penalties or other charges to a tenant for late payment of rent. Additionally, a multi-family borrower that receives a forbearance may not require a tenant to vacate a dwelling unit before a date that is 30 days after the date on which the borrower provides the tenant notice to vacate and may not issue a notice to vacate until after the expiration of the forbearance.

~~The Paycheck Protection Program~~

The CARES Act provides approximately $350 billion to fund loans to eligible small businesses through the Small Business Administration’s (“SBA”) 7(a) loan guaranty program. These loans will be 100% federally guaranteed (principal and interest) through December 31, 2020. An eligible business can apply for a Paycheck Protection Program (“PPP”) loan up to 2.5 times its average monthly “payroll costs" limited to a loan amount of $10.0 million. The proceeds of the loan can be used for payroll (excluding individual employee compensation over $100,000 per year), mortgage, interest, rent, insurance, utilities and other qualifying expenses. PPP loans will have: (a) an interest rate of 1.0%, (b) a two-year loan term to maturity; and (c) principal and interest payments deferred for six months from the date of disbursement. The SBA will guarantee 100% of the PPP loans made to eligible borrowers. The entire principal amount of the borrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the business are maintained and 75% of the loan proceeds are used for payroll expenses, with the remaining 25% of the loan proceeds used for other qualifying expenses.

~~The Paycheck Protection Program Lending Facility~~

On April 9, 2020, the Federal Reserve Board created the Paycheck Protection Program Lending Facility (the “Facility”) to facilitate lending by eligible borrowers to small businesses under the Paycheck Protection Program. Under the Facility, the Federal Reserve Banks will lend to depository institutions that originated PPP loans on a non-recourse basis, taking the PPP Loans as collateral. Only PPP loans guaranteed by the SBA are eligible to serve as collateral for the Facility. The maturity date of an extension of credit under the Facility will equal the maturity date of the PPP Loan pledged to secure the extension of credit. The maturity date of the Facility’s extension of credit will be accelerated if the underlying PPP Loan goes into default and the eligible borrower sells the PPP Loan to the SBA to realize on the SBA guarantee. The maturity date of the Facility’s extension of credit also will be accelerated to the extent of any loan forgiveness reimbursement received by the eligible borrower from the SBA. Extensions of credit under the Facility will be made at a rate of 35 basis points. There are no fees associated with the Facility. The principal amount of an extension of credit under the Facility will be equal to the principal amount of the PPP Loan pledged as collateral to secure the extension of credit.

~~The Paycheck Protection Program and Health Care Enhancement Act~~

~~On April 23, 2020, the Paycheck Protection Program and Health Care Enhancement Act (the “PPP Enhancement Act”~~2021 ("CRRSA Act") was signed into law, which provides $310 billion in additional funding (the “New PPP Funds”) to the U.S. Small Business Administration’s Paycheck Protection Program previously established by the CARES Act. This increases the PPP’s original funding limit of $349 billion to $659 billion, as the original funds were fully exhausted by PPP borrowers. To ensure businesses have access to PPP loans from smaller lenders, the PPP Enhancement Act requirescontains provisions that a portion of the New PPP Funds are allocated to smaller insured depository institutions, federal and state credit unions and “community financial institutions,” which includes community development and minority-owned financial institutions. Specifically: (1) $30 billion of the New PPP

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~~Funds must be used for PPP loans made by (a) community~~could directly impact financial institutions (b) insured depository institutions with consolidated assets of less than $10 billion and (b) credit unions with consolidated assets of less than $10 billion; and (2) an additional $30 billion of the New PPP Funds must be used for PPP loans made byincluding: (1) extending until January 1, 2022 when insured depository institutions and depository institution holding companies have to comply with the current expected credit ~~unions with consolidated assets between $10 billion~~losses (CECL) accounting standard; and ~~$50 billion.~~(2) extending until January 1, 2022 the authority granted to banks under the CARES Act to elect to temporarily suspend the requirements under U.S. GAAP applicable to troubled debt restructurings for loan modifications related to the COVID-19 pandemic for any loan that was not more than 30 days past due as of December 31, 2019. The ~~foregoing allocations do not prohibit smaller~~CRRSA Act directs financial regulators to support community development financial institutions and ~~community financial~~minority depository institutions ~~from making PPP loans above their respective allocation amounts. Rather, institutions with $50~~and directs Congress to re-appropriate $429 billion ~~or more~~ in ~~consolidated assets and non-bank lenders would not have access to $60 billion of the New PPP Funds.~~

~~The Paycheck Protection Program Flexibility~~unobligated CARES Act

On June 5, 2020, the Paycheck Protection Program Flexibility Act of 2020 was signed into law that amends the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and eases rules on how and when small businesses can use loans and still be eligible for forgiveness. funds. The PPP, ~~Flexibility~~which was originally established under the CARES Act, ~~changed many aspects of~~was also extended under the Paycheck Protection Program (“PPP”), including: (1) extending the covered period for loan forgiveness purposes to the earlier of 24 weeks or December 31, 2020; (2) lowering the amount required to be spent on payroll costs from 75% to 60% of the PPP loan funds; (3) extending the loan maturity period from two to five years; and (4) revising the loan deferral period.CRRSA Act.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

No material changes in the Corporation’s market risk occurred during the current period. A detailed discussion of market risk is provided in the Corporation's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Management is responsible for the disclosure controls and procedures of the Corporation. Disclosure controls and procedures are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be so disclosed by an issuer is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of the Corporation’s management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer), of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on that evaluation, the Corporation’s Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of ~~June 30, 2020.~~March 31, 2021.

Changes in Internal Control over Financial Reporting

Effective January 1, 2020, the Corporation adopted CECL. The Corporation designed new controls and modified existing controls as part of this adoption. These additional controls over financial reporting included controls over model creation and design, model governance, assumptions, and expanded controls over loan level data. There were no changes in the Corporation's internal control over financial reporting (as defined in Rule 13a-15(f)) during the quarter ended ~~June 30, 2020~~March 31, 2021 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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Item 1A.Risk Factors

~~In addition~~There have been no material changes in risk factors applicable to the ~~other information contained in this Quarterly Report on Form 10-Q, the following risk factors represent material updates and additions to the risk factors previously~~Corporation from those disclosed in ~~our~~"Risk Factors" in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, each as filed with the SEC. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. Further, to the extent that any of the information contained in this Quarterly Report on Form 10-Q constitutes forward-looking statements, the risk factors set forth below also are cautionary statements identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

~~The economic impact of the COVID-19 outbreak could adversely affect our financial condition and results of operations.~~

The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments ordered non-essential businesses to close and residents to shelter in place at home. This resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. During the COVID-19 outbreak, stock markets have experienced declines in value and in particular bank stocks have significantly declined. In response to the COVID-19 outbreak, the Federal Reserve reduced the benchmark fed funds rate to a target range of 0% to 0.25%, and the yields on 10- and 30-year treasury notes declined to historic lows. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the COVID-19 outbreak. Certain industries have been particularly hard-hit, including the travel and hospitality industry, the restaurant industry and the retail industry. Finally, the spread of the coronavirus has caused us to modify our business practices, including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences. We have many employees working remotely and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated. Further, while jurisdictions in which we operate have gradually allowed the reopening of businesses and other organizations and removed the sheltering restrictions, it is premature to assess whether doing so will result in a meaningful increase in economic activity and the impact of such actions on further COVID-19 cases. As the result of the COVID-19 pandemic and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:

•~~Demand for our products and services may decline, making it difficult to grow assets and income;~~

•If the economy is unable to substantially and successfully reopen, and high levels of unemployment continue for an extended period of time, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income;

•~~Collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase;~~

•~~Our allowance for credit losses on loans and leases may increase if borrowers experience financial difficulties beyond forbearance periods, which will adversely affect our net income;~~

•~~The net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us;~~

•A further and sustained decline in our stock price or the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause management to perform impairment testing on its goodwill or core deposit and customer relationships intangibles that could result in an impairment charge being recorded for that period, that would adversely impact our results of operations and the ability of the Bank to pay dividends to us;

•~~A material decrease in net income or a net loss over several quarters could result in the elimination of or a decrease in the rate of our quarterly cash dividend,~~

•~~Our wealth management revenues may decline with continuing market turmoil;~~

•~~Our cyber security risks are increased as the result of an increase in the number of employees working remotely;~~

•~~We rely on third party vendors for certain services and the unavailability of a critical service due to the COVID-19 outbreak could have an adverse effect on us;~~

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•~~Federal Deposit Insurance Corporation premiums may increase if the agency experience additional resolution costs; and~~

•We face litigation, regulatory enforcement and reputation risk as a result of our participation in the PPP and the risk that the Small Business Administration may not fund some or all PPP loan guaranties.

Moreover, our future success and profitability substantially depends on the management skills of our executive officers and directors, many of whom have held officer and director positions with us for many years. The unanticipated loss or unavailability of key employees due to the outbreak could harm our ability to operate our business or execute our business strategy. We may not be successful in finding and integrating suitable successors in the event of key employee loss or unavailability.

~~Any one or a combination of the factors identified above, or other factors, could materially and adversely affect our business, financial condition, results of operations and prospects.~~

~~We may be adversely affected by the emergency actions taken by the U.S. government to mitigate the impact of the COVID-19 pandemic on the U.S. economy.~~

The United States government has taken a number of actions to mitigate the impact of the COVID-19 pandemic on the U.S. economy. Among other steps taken, the Federal Reserve cut the federal funds rate in March 2020, and also lowered the interest rate on emergency lending at the discount window and lengthened the term of loans to 90 days. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act, or CARES Act was signed into law. Key provisions of the CARES Act include one-time payments to individuals, strengthened unemployment insurance, additional health-care funding, loans and grants to certain businesses, and temporary amendments to the Internal Revenue Code. The SBA was tapped to lead the effort to loan funds to small businesses, in conjunction with banks. The Federal Reserve and the U.S. Treasury have also responded with lending programs under the CARES Act. Further, the Federal Reserve has intervened with a number of credit facilities intended to keep the capital markets liquid.

There can be no assurance that these interventions by the U.S. government will be successful in mitigating the impact of the COVID-19 pandemic and it is unclear what the cumulative effect of these extraordinary actions by the U.S. government will be on the economy as a whole and upon the financial condition and results of operations of the Corporation and its customers, both in the short-term and the long-term.

We are subject to litigation, regulatory enforcement risk and reputation risk regarding the Bank’s participation in the Paycheck Protection Program and the risk that the Small Business Administration ("SBA")may not fund some or all PPP loan guaranties.

The CARES Act included a $349 billion loan program administered through the SBA referred to as the PPP. The $349 billion in funds for the PPP were exhausted on April 16, 2020. On April 27, 2020, the program was reopened with an additional $310 billion approved by Congress. Under the PPP, small businesses and other entities and individuals can apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to detailed qualifications and eligibility criteria. The Bank, as participating lender, has originated approximately 2,550 loans under the PPP aggregating approximately $510 million through June 30, 2020.

Because of the short timeframe between the passing of the CARES Act and implementation of the PPP, some of the rules and guidance relating to PPP were issued after lenders began processing PPP applications. Also, there was and continues to be uncertainty in the laws, rules and guidance relating to the PPP. Since the opening of the PPP, several banks have been subject to litigation regarding the procedures used in processing PPP applications. In addition, some banks and borrowers have received negative media attention associated with PPP loans. Although we believe that we have administered the PPP in accordance with all applicable laws, regulations and guidance, we may be exposed to litigation risk and negative media attention our participation in the PPP. If any such litigation is filed and is not resolved in in our favor, it may result in significant financial liability to us or adversely affect our reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP-related litigation or media attention could have a material adverse impact on our business, financial condition, and results of operations.

The PPP has also attracted interest from federal and state enforcement authorities, oversight agencies, regulators, and Congressional committees. State Attorneys General and other federal and state agencies may assert that they are not subject to the provisions of the CARES Act and the PPP regulations entitling the Bank to rely on borrower certifications, and take more aggressive action against the Bank for alleged violations of the provisions governing the Bank’s participation in the PPP. Federal and state regulators can impose or request that we consent to substantial sanctions, restrictions and requirements if they

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determine there are violations of laws, rules or regulations or weaknesses or failures with respect to general standards of safety and soundness, which could adversely affect our business, reputation, results of operation and financial condition.

The Bank also has credit risk on PPP loans if the SBA determines that there is a deficiency in the manner in which any loans were originated, funded or serviced by the Bank, including any issue with the eligibility of a borrower to receive a PPP loan. In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded or serviced by the Bank, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty or, if the SBA has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Bank.

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

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


ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
~~April~~January 1 – ~~30, 2020~~31, 2021	—	$	—	—	679,174
~~May~~February 1 – ~~31, 2020~~28, 2021	—	—		—	679,174
~~June~~March 1 – ~~30, 2020~~31, 2021	—	—		—	679,174
Total	—	$	—	—

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

In addition to the repurchases disclosed above, participants in the Corporation's stock-based incentive plans may have shares withheld to cover income taxes upon the vesting of restricted stock awards and may use a stock swap to exercise ~~non-qualified~~ stock options. Shares withheld to ~~pay~~cover income taxes upon the vesting of restricted stock awards and stock swaps to exercise stock options are repurchased pursuant to the terms of the applicable plan and not under the Corporation's share repurchase program. ~~Share~~Shares repurchased pursuant to these plans during the three months ended ~~June 30, 2020~~March 31, 2021 were as follows:

Period Total Number of Shares Purchased Average Price Paid per Share
April 1 – 30, 2020 906 $ 15.26
May 1 – 31, 2020 — —
June 1 – 30, 2020 — —
Total 906 $ 15.26


Period	Total Number of Shares Purchased	Average Price Paid per Share
January 1 – 31, 2021	—	$	—
February 1 – 28, 2021	1,180	25.32
March 1 – 31, 2021	9,313	28.42
Total	10,493	$	28.07

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibits

Exhibit 3.1

Amended and Restated Articles of Incorporation are incorporated by reference to Exhibit 3.1 of Form 10-K, filed with the SEC on February 28, 2019.

Exhibit 3.2

Amended By-Laws are incorporated by reference to Exhibit 3.2 of Form ~~10-K,~~8 -K, filed with the SEC on ~~February 28, 2019.~~January 2 9 , 20 21 .

Exhibit 31.1

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

Exhibit 31.2

Certification of Brian J. Richardson, Executive Vice President and Chief Financial Officer of the Corporation, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1

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

Exhibit 32.2

Certification of Brian J. Richardson, Executive Vice President and Chief Financial Officer of the Corporation, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 101

The following financial statements from the Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2020,~~March 31, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Changes in Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Unaudited Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

Exhibit 104

The cover page from the Corporation's Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2020,~~March 31, 2021, formatted in Inline XBRL.

7357

~~Table of Contents~~

SIGNATURES

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


			Univest Financial Corporation
			(Registrant)

Date: ~~July 24, 2020~~May 3, 2021			/s/ Jeffrey M. Schweitzer
			Jeffrey M. Schweitzer President and Chief Executive Officer (Principal Executive Officer)

Date: ~~July 24, 2020~~May 3, 2021			/s/ Brian J. Richardson
			Brian J. Richardson Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

7458


	January 1, 2020
(Dollars in thousands)	Pre-adoption		Adoption Impact		As Reported
Assets:



ACL on debt securities: available-for-sale:
Corporate bonds	$	—	$	300	$	300
ACL on loans and leases:
Commercial, financial and agricultural	8,759		5,284		14,043
Real estate-commercial	15,750		6,208		21,958
Real estate-construction	2,446		29		2,475
Real estate-residential secured for business purpose	2,622		2,502		5,124
Real estate-residential secured for personal purpose	2,713		(706)		2,007
Real estate-home equity secured for personal purpose	1,076		(364)		712
Loans to individuals	470		104		574
Lease financings	1,311		(135)		1,176
Unallocated	184		—		184
Total ACL on loans and leases	35,331		12,922		48,253

Liabilities:
Reserve for unfunded commitments	$420		$1,145		$	1,565


(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial		Real Estate— Construction		Real Estate— Residential Secured for Business Purpose		Total
At December 31, 2019
Grade:
1. Pass	$	911,848	$	1,974,561	$	201,424	$	367,122	$	3,454,955
2. Special Mention	18,843		24,199		20,987		3,769		67,798
3. Substandard	16,338		41,681		10,184		3,082		71,285

Total	$	947,029	$	2,040,441	$	232,595	$	373,973	$	3,594,038


(Dollars in thousands)	Real Estate— Residential Secured for Personal Purpose		Real Estate— Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financings		Total
At December 31, 2019
Performing	$	437,021	$	172,954	$	29,809	$	148,866	$	788,650
Nonperforming	2,038		1,481		74		555		4,148
Total	$	439,059	$	174,435	$	29,883	$	149,421	$	792,798


(Dollars in thousands)	Beginning balance, prior to adoption of ASU No. 2016-13 for CECL		Adjustment to initially apply ASU No. 2016-13 for CECL		(Recovery of provision) provision for credit losses		Charge-offs		Recoveries		Ending balance
Six Months Ended June 30, 2020
Reserve for credit losses, loans and leases:
Commercial, Financial and Agricultural	$	8,759	$	5,284	$	3,596	$	(1,225)	$	322	$	16,736
Real Estate-Commercial	15,750		6,208		31,480		(2,802)		35		50,671
Real Estate-Construction	2,446		29		1,655		—		—		4,130
Real Estate-Residential Secured for Business Purpose	2,622		2,502		3,147		(99)		8		8,180
Real Estate-Residential Secured for Personal Purpose	2,713		(706)		662		—		—		2,669
Real Estate-Home Equity Secured for Personal Purpose	1,076		(364)		351		—		8		1,071
Loans to Individuals	470		104		286		(128)		39		771
Lease Financings	1,311		(135)		886		(364)		141		1,839
Unallocated	184		—		(34)		N/A		N/A		150
Total	$	35,331	$	12,922	$	42,029	$	(4,618)	$	553	$	86,217
Six Months Ended June 30, 2019
Reserve for credit losses, loans and leases:
Commercial, Financial and Agricultural	$	7,983	$	—	$	2,531	$	(1,486)	$	101	$	9,129
Real Estate-Commercial and Construction	13,903		—		1,558		(74)		91		15,478
Real Estate-Residential Secured for Business Purpose	2,236		—		232		—		10		2,478
Real Estate-Residential and Home Equity Secured for Personal Purpose	3,199		—		322		(15)		12		3,518
Loans to Individuals	484		—		95		(136)		38		481
Lease Financings	1,288		—		19		(214)		148		1,241
Unallocated	271		—		4		N/A		N/A		275
Total	$	29,364	$	—	$	4,761	$	(1,925)	$	400	$	32,600


	Amortization Period Extension
(Dollars in thousands)	No. of Loans	Amount
Three Months Ended June 30, 2020
Accruing Troubled Debt Restructured Loans:




Total	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	619


Total	1	$	619
Three Months Ended June 30, 2019
Accruing Troubled Debt Restructured Loans:




Real estate—home equity secured for personal purpose	1	$	55
Total	1	$	55
Nonaccrual Troubled Debt Restructured Loans:




Total	—	$	—
Six Months Ended June 30, 2020
Accruing Troubled Debt Restructured Loans:




Total	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	619



Total	1	$	619
Six Months Ended June 30, 2019
Accruing Troubled Debt Restructured Loans:




Real estate—home equity secured for personal purpose	1	$	55
Total	1	$	55
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	2	$	956
Real estate—commercial real estate	1	1,313


Total	3	$	2,269


(Dollars in thousands)	As of June 30, 2020		Weighted Average Rate
Remainder of 2020	$	10,000	1.47	%
2021	45,000		1.93
2022	35,000		1.17
2023	50,000		1.73
2024	60,000		0.98
Thereafter	—		—
Total	$	200,000	1.44	%


	Three Months Ended
	June 30, 2019
(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	54,041	$	11	$	—	$	8	$	54,060
Interest expense	10,164		—		—		1,261		11,425
Net interest income	43,877		11		—		(1,253)		42,635
Provision for credit losses	2,073		—		—		—		2,073
Noninterest income	6,014		6,155		4,145		42		16,356


Noninterest expense	28,334		3,893		3,151		1,403		36,781
Intersegment (revenue) expense*	(295)		161		134		—		—
Income (expense) before income taxes	19,779		2,112		860		(2,614)		20,137
Income tax expense (benefit)	3,660		409		70		(470)		3,669
Net income (loss)	$	16,119	$	1,703	$	790	$	(2,144)	$	16,468

Capital expenditures	$	371	$	35	$	39	$	137	$	582


Maturity of Lease Liabilities	(Dollars in thousands)	Amount
Remainder of 2020		$	1,866
2021		3,742
2022		3,727
2023		3,677
2024		3,547
Thereafter		34,555
Total lease payments		51,114
Less: imputed interest		(13,687)
Present value of lease liabilities		$	37,427