Table of Contents

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 ~~March 31,~~September 30, 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 accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with 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						~~29,379,575~~29,449,012
(Title of Class)						(Number of shares outstanding at ~~April 30,~~November 1, 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 ~~March~~ 3 1 ~~, 202~~1 September 30, 2021 and December 31, 2020	2

		Condensed Consolidated Statements of Income for the Three and Nine Months Ended ~~March~~September 3 130 , 20 2 121 and 2020	3

		Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended ~~March~~September 3 10 , 20 2 121 and 2020	4

		Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended ~~March~~September 3 10 , 20 2 121 and 2020	56

		Condensed Consolidated Statements of Cash Flows for the ~~Three~~N ine Months Ended ~~March 31~~September 30 , 20 2 121 and 2020	68

		Notes to Condensed Consolidated Financial Statements	710

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4048

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5565

	Item 4.	Controls and Procedures	5565

Part II.	Other Information

	Item 1.	Legal Proceedings	5565

	Item 1A.	Risk Factors	5666

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5666

	Item 3.	Defaults Upon Senior Securities	5666

	Item 4.	Mine Safety Disclosures	5666

	Item 5.	Other Information	5666

	Item 6.	Exhibits	5767

Signatures			5868

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)
(Dollars in thousands, except share data) At March 31, 2021 At December 31, 2020
ASSETS
Cash and due from banks $ 35,117 $ 62,555
Interest-earning deposits with other banks 152,200 157,303
Cash and cash equivalents 187,317 219,858
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) 238,829 218,640
Investments in equity securities 3,524 3,279
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost 25,571 28,183
Loans held for sale 22,636 37,039
Loans and leases held for investment 5,415,006 5,306,841
Less: Allowance for credit losses, loans and leases (71,497) (83,044)
Net loans and leases held for investment 5,343,509 5,223,797
Premises and equipment, net 55,650 55,636
Operating lease right-of-use assets 34,317 34,325
Goodwill 172,559 172,559
Other intangibles, net of accumulated amortization 9,225 8,866
Bank owned life insurance 118,435 117,718
Accrued interest receivable and other assets 69,940 65,339
Total assets $ 6,416,665 $ 6,336,496
LIABILITIES
Noninterest-bearing deposits $ 1,857,547 $ 1,690,663
Interest-bearing deposits:
Demand deposits 2,006,368 2,070,183
Savings deposits 973,466 918,094
Time deposits 474,211 563,775
Total deposits 5,311,592 5,242,715
Short-term borrowings 26,676 17,906
Long-term debt 95,000 110,000
Subordinated notes 173,617 183,515
Operating lease liabilities 37,737 37,690
Accrued interest payable and other liabilities 49,588 52,198
Total liabilities 5,694,210 5,644,024
SHAREHOLDERS’ EQUITY
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 296,177 296,186
Retained earnings 333,581 306,899
Accumulated other comprehensive loss, net of tax benefit (20,440) (22,144)
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 722,455 692,472
Total liabilities and shareholders’ equity $ 6,416,665 $ 6,336,496


	(UNAUDITED)
(Dollars in thousands, except share data)	At September 30, 2021		At December 31, 2020
ASSETS
Cash and due from banks	$	67,517	$	62,555
Interest-earning deposits with other banks	834,840		157,303
Cash and cash equivalents	902,357		219,858

Investment securities held-to-maturity (fair value $115,661 and $156,325 at September 30, 2021 and December 31, 2020, respectively)	112,643		151,257
Investment securities available-for-sale (amortized cost $278,923 and $221,254, net of allowance for credit losses of $815 and $869 at September 30, 2021 and December 31, 2020, respectively)	277,773		218,640
Investments in equity securities	2,961		3,279
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	28,679		28,183
Loans held for sale	29,093		37,039
Loans and leases held for investment	5,252,045		5,306,841
Less: Allowance for credit losses, loans and leases	(70,146)		(83,044)
Net loans and leases held for investment	5,181,899		5,223,797
Premises and equipment, net	55,354		55,636
Operating lease right-of-use assets	31,570		34,325
Goodwill	172,559		172,559
Other intangibles, net of accumulated amortization	9,359		8,866
Bank owned life insurance	117,981		117,718
Accrued interest receivable and other assets	57,624		65,339
Total assets	$	6,979,852	$	6,336,496
LIABILITIES
Noninterest-bearing deposits	$	1,861,007	$	1,690,663
Interest-bearing deposits	4,077,147		3,552,052
Total deposits	5,938,154		5,242,715
Short-term borrowings	14,101		17,906
Long-term debt	95,000		110,000
Subordinated notes	98,797		183,515
Operating lease liabilities	34,641		37,690
Accrued interest payable and other liabilities	43,136		52,198
Total liabilities	6,223,829		5,644,024
SHAREHOLDERS’ EQUITY
Common stock, $5 par value: 48,000,000 shares authorized at September 30, 2021 and December 31, 2020; 31,556,799 shares issued at September 30, 2021 and December 31, 2020; 29,438,402 and 29,295,052 shares outstanding at September 30, 2021 and December 31, 2020, respectively	157,784		157,784
Additional paid-in capital	298,033		296,186
Retained earnings	363,607		306,899
Accumulated other comprehensive loss, net of tax benefit	(20,073)		(22,144)
Treasury stock, at cost; 2,118,397 and 2,261,747 shares at September 30, 2021 and December 31, 2020, respectively	(43,328)		(46,253)
Total shareholders’ equity	756,023		692,472
Total liabilities and shareholders’ equity	$	6,979,852	$	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
March 31,
(Dollars in thousands, except per share data) 2021 2020
Interest income
Interest and fees on loans and leases:
Taxable $ 47,655 $ 45,561
Exempt from federal income taxes 2,008 2,661
Total interest and fees on loans and leases 49,663 48,222
Interest and dividends on investment securities:
Taxable 1,303 2,705
Exempt from federal income taxes 87 240
Interest on deposits with other banks 56 325
Interest and dividends on other earning assets 348 527
Total interest income 51,457 52,019
Interest expense
Interest on deposits 3,400 7,406
Interest on short-term borrowings 2 106
Interest on long-term debt and subordinated notes 2,641 2,039
Total interest expense 6,043 9,551
Net interest income 45,414 42,468
(Reversal of provision) provision for credit losses (11,283) 21,843
Net interest income after provision for credit losses 56,697 20,625
Noninterest income
Trust fee income 2,034 1,890
Service charges on deposit accounts 1,282 1,397
Investment advisory commission and fee income 4,697 4,255
Insurance commission and fee income 4,955 4,732
Other service fee income 2,192 1,870
Bank owned life insurance income 717 734
Net gain on sales of investment securities 65 695
Net gain on mortgage banking activities 5,938 2,744
Other income 1,370 67
Total noninterest income 23,250 18,384
Noninterest expense
Salaries, benefits and commissions 24,780 23,836
Net occupancy 2,739 2,574
Equipment 946 995
Data processing 3,050 2,760
Professional fees 1,748 1,317
Marketing and advertising 280 402
Deposit insurance premiums 636 504
Intangible expenses 249 330
Other expense 5,112 6,059
Total noninterest expense 39,540 38,777
Income before income taxes 40,407 232
Income tax expense (benefit) 7,804 (606)
Net income $ 32,603 $ 838
Net income per share:
Basic $ 1.11 $ 0.03
Diluted 1.11 0.03


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in thousands, except per share data)	2021		2020		2021		2020
Interest income
Interest and fees on loans and leases	$	51,476	$	48,310	$	151,727	$	143,669
Interest and dividends on investment securities:
Taxable	1,552		1,646		4,254		6,569
Exempt from federal income taxes	20		137		155		573
Interest on deposits with other banks	189		100		291		492
Interest and dividends on other earning assets	334		419		1,042		1,308
Total interest income	53,571		50,612		157,469		152,611
Interest expense
Interest on deposits	3,230		4,028		9,789		15,806
Interest on short-term borrowings	2		97		7		325
Interest on long-term debt and subordinated notes	1,652		2,633		6,815		6,640
Total interest expense	4,884		6,758		16,611		22,771
Net interest income	48,687		43,854		140,858		129,840
(Reversal of provision) provision for credit losses	(182)		3,935		(11,524)		49,515
Net interest income after provision for credit losses	48,869		39,919		152,382		80,325
Noninterest income
Trust fee income	2,126		1,915		6,317		5,729
Service charges on deposit accounts	1,422		1,187		4,018		3,474
Investment advisory commission and fee income	4,796		4,005		14,051		11,800
Insurance commission and fee income	3,837		3,776		12,631		12,575
Other service fee income	2,576		2,093		7,516		5,451
Bank owned life insurance income	925		741		3,262		2,207
Net gain on sales of investment securities	21		57		140		817
Net gain on mortgage banking activities	3,224		5,860		12,623		12,119
Other income	1,625		2,171		3,474		4,017
Total noninterest income	20,552		21,805		64,032		58,189
Noninterest expense
Salaries, benefits and commissions	26,641		24,059		76,817		69,595
Net occupancy	2,525		2,609		7,920		7,661
Equipment	1,000		972		2,914		2,890
Data processing	3,274		2,862		9,388		8,372
Professional fees	2,174		1,321		5,937		3,902
Marketing and advertising	539		463		1,380		1,400
Deposit insurance premiums	765		707		2,014		1,826
Intangible expenses	214		283		712		934



Other expense	6,116		5,251		16,992		16,684
Total noninterest expense	43,248		38,527		124,074		113,264
Income before income taxes	26,173		23,197		92,340		25,250
Income tax expense	5,262		5,078		17,951		4,208
Net income	$	20,911	$	18,119	$	74,389	$	21,042
Net income per share:
Basic	$	0.71	$	0.62	$	2.53	$	0.72
Diluted	0.71		0.62		2.52		0.72

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 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)


	Three Months Ended September 30,
(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	$	26,173	$	5,262	$	20,911	$	23,197	$	5,078	$	18,119
Other comprehensive income:
Net unrealized (losses) gains on available-for-sale investment securities:
Net unrealized holding (losses) gains arising during the period	(1,378)		(292)		(1,086)		726		153		573
Provision (reversal of provision) for credit losses	330		70		260		(163)		(35)		(128)
Less: reclassification adjustment for net gains on sales realized in net income (1)	(21)		(4)		(17)		(57)		(12)		(45)

Total net unrealized (losses) gains on available-for-sale investment securities	(1,069)		(226)		(843)		506		106		400
Net unrealized gains on interest rate swaps used in cash flow hedges:
Net unrealized holding (losses) gains arising during the period	(7)		(1)		(6)		5		2		3
Less: reclassification adjustment for net losses realized in net income (2)	77		16		61		78		16		62
Total net unrealized gains on interest rate swaps used in cash flow hedges	70		15		55		83		18		65
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3)	329		69		260		307		65		242

Total defined benefit pension plans	329		69		260		307		65		242
Other comprehensive (loss) income	(670)		(142)		(528)		896		189		707
Total comprehensive income	$	25,503	$	5,120	$	20,383	$	24,093	$	5,267	$	18,826

(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


	Nine Months Ended September 30,
(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	$	92,340	$	17,951	$	74,389	$	25,250	$	4,208	$	21,042
Other comprehensive income:
Net unrealized gains on available-for-sale investment securities:
Net unrealized holding gains arising during the period	1,604		336		1,268		2,930		615		2,315
(Reversal of provision) provision for credit losses	(54)		(11)		(43)		392		82		310
Less: reclassification adjustment for net gains on sales realized in net income (1)	(140)		(29)		(111)		(817)		(172)		(645)

Total net unrealized gains on available-for-sale investment securities	1,410		296		1,114		2,505		525		1,980
Net unrealized gains (losses) on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period	(5)		(1)		(4)		(554)		(116)		(438)
Less: reclassification adjustment for net losses realized in net income (2)	229		48		181		176		37		139
Total net unrealized gains (losses) on interest rate swaps used in cash flow hedges	224		47		177		(378)		(79)		(299)
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3)	987		207		780		901		189		712

Total defined benefit pension plans	987		207		780		901		189		712
Other comprehensive income	2,621		550		2,071		3,028		635		2,393
Total comprehensive income	$	94,961	$	18,501	$	76,460	$	28,278	$	4,843	$	23,435

(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).

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

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Total
Three Months Ended September 30, 2021
Balance at June 30, 2021	29,411,731	$	157,784	$	297,208	$	348,579	$	(19,545)	$	(44,028)	$	739,998
Net income	—	—		—		20,911		—		—		20,911
Other comprehensive loss, net of income tax benefit	—	—		—		—		(528)		—		(528)
Cash dividends declared ($0.20 per share)	—	—		—		(5,883)		—		—		(5,883)
Stock-based compensation	—	—		852		—		—		1		853
Stock issued under dividend reinvestment and employee stock purchase plans	22,327	—		—		—		—		610		610
Vesting of restricted stock units	1,344	—		(27)		—		—		27		—

Exercise of stock options	3,000	—		—		—		—		62		62


Balance at September 30, 2021	29,438,402	$	157,784	$	298,033	$	363,607	$	(20,073)	$	(43,328)	$	756,023

(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 March 31, 2021
Balance at December 31, 2020 29,295,052 $ 157,784 $ 296,186 $ 306,899 $ (22,144) $ (46,253) $ 692,472
Net income — 0 0 32,603 0 0 32,603
Other comprehensive income, net of income tax — 0 0 0 1,704 0 1,704
Cash dividends declared ($0.20 per share) — 0 0 (5,864) 0 0 (5,864)
Stock-based compensation — 0 878 (56) 0 0 822
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 42,619 0 (1,126) 0 0 771 (355)
Exercise of stock options 36,286 0 17 0 0 742 759
Cancellation of performance-based restricted stock awards (7,199) 0 157 0 0 (157) 0
Purchases of treasury stock (10,494) 0 0 0 0 (295) (295)
Balance at March 31, 2021 29,379,575 $ 157,784 $ 296,177 $ 333,581 $ (20,440) $ (44,647) $ 722,455


(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Three Months Ended September 30, 2020
Balance at June 30, 2020	29,201,985	$	157,784	$	296,028	$	268,751	$	(19,807)	$	(47,883)	$	654,873
Net income	—	—		—		18,119		—		—		18,119
Other comprehensive income, net of income tax	—	—		—		—		707		—		707
Cash dividends declared ($0.20 per share)	—	—		—		(5,845)		—		—		(5,845)
Stock-based compensation	—	—		658		1		—		—		659
Stock issued under dividend reinvestment and employee stock purchase plans	39,317	—		(87)		—		—		681		594





Balance at September 30, 2020	29,241,302	$	157,784	$	296,599	$	281,026	$	(19,100)	$	(47,202)	$	669,107

(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


(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Treasury Stock		Total
Nine Months Ended September 30, 2021
Balance at December 31, 2020	29,295,052	$	157,784	$	296,186	$	306,899	$	(22,144)	$	(46,253)	$	692,472
Net income	—	—		—		74,389		—		—		74,389
Other comprehensive income, net of income tax	—	—		—		—		2,071		—		2,071
Cash dividends declared ($0.60 per share)	—	—		—		(17,624)		—		—		(17,624)
Stock-based compensation	—	—		2,552		(56)		—		—		2,496
Stock issued under dividend reinvestment and employee stock purchase plans	67,553	—		90		(1)		—		1,735		1,824
Vesting of restricted stock units, net of shares withheld to cover taxes	43,963	—		(1,153)		—		—		798		(355)

Exercise of stock options	49,527	—		31		—		—		1,014		1,045
Cancellation of performance-based restricted stock awards	(7,199)	—		327		—		—		(327)		—
Purchases of treasury stock	(10,494)	—		—		—		—		(295)		(295)
Balance at September 30, 2021	29,438,402	$	157,784	$	298,033	$	363,607	$	(20,073)	$	(43,328)	$	756,023


(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Nine Months Ended September 30, 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	—	—		—		(11,284)		237		—		(11,047)
Net income	—	—		—		21,042		—		—		21,042
Other comprehensive income, net of income tax	—	—		—		—		2,393		—		2,393
Cash dividends declared ($0.60 per share)	—	—		—		(17,522)		—		—		(17,522)
Stock-based compensation	—	—		1,733		(13)		—		—		1,720
Stock issued under dividend reinvestment and employee stock purchase plans	103,471	—		(198)		—		—		1,955		1,757
Vesting of restricted stock units	17,035	—		(346)		—		—		346		—

Exercise of stock options	5,000	—		(7)		—		—		101		94
Cancellation of performance-based restricted stock awards	(14,777)	—		418		—		—		(418)		—
Purchases of treasury stock	(204,056)	—		—		—		—		(4,452)		(4,452)
Balance at September 30, 2020	29,241,302	$	157,784	$	296,599	$	281,026	$	(19,100)	$	(47,202)	$	669,107

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

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(Dollars in thousands)	2021		2020
Cash flows from operating activities:
Net income	$	74,389	$	21,042
Adjustments to reconcile net income to net cash provided by operating activities:
(Reversal of provision) provision for credit losses	(11,524)		49,515
Depreciation of premises and equipment	3,523		3,620
Net amortization of investment securities premiums and discounts	2,078		1,755
Net gain on sales of investment securities	(140)		(817)
Net gain on mortgage banking activities	(12,623)		(12,119)



Bank owned life insurance income	(3,262)		(2,207)
Stock-based compensation	2,674		1,853
Intangible expenses	712		934
Other adjustments to reconcile net income to cash used in operating activities	(4,956)		(3,392)

Originations of loans held for sale	(396,418)		(322,135)
Proceeds from the sale of loans held for sale	417,920		321,233
Contributions to pension and other postretirement benefit plans	(198)		(203)
Increase in accrued interest receivable and other assets	(882)		(18,774)
(Decrease) increase in accrued interest payable and other liabilities	(5,750)		5,786
Net cash provided by operating activities	65,543		46,091
Cash flows from investing activities:


Purchases of premises and equipment	(3,241)		(2,363)
Proceeds from maturities, calls and principal repayments of securities held-to-maturity	52,121		56,933
Proceeds from maturities, calls and principal repayments of securities available-for-sale	40,088		43,853
Proceeds from sales of securities available-for-sale	4,135		65,621
Purchases of investment securities held-to-maturity	(14,852)		(43,116)
Purchases of investment securities available-for-sale	(102,585)		(49,329)
Proceeds from sales of money market mutual funds	5,818		10,487
Purchases of money market mutual funds	(5,336)		(10,971)
Net decrease in other investments	(496)		(1,469)
Proceeds from sale of loans originally held-for-investment	996		—
Proceeds from sale of portfolio loans	—		14,416
Net decrease (increase) in loans and leases	54,661		(851,403)
Proceeds from sales of other real estate owned	7,255		75


Proceeds from bank owned life insurance	2,302		—
Net cash provided by (used in) investing activities	40,866		(767,266)
Cash flows from financing activities:
Net increase in deposits	695,414		851,521
Net decrease in short-term borrowings	(3,805)		(999)
Proceeds from issuance of long-term debt	—		125,000
Repayment of long-term debt	(15,000)		(70,000)
Proceeds from issuance of subordinated notes	—		98,448
Repayment of subordinated debt	(85,000)		—

Payment of contingent consideration on acquisitions	(58)		(91)

Purchases of treasury stock	(650)		(4,452)
Stock issued under dividend reinvestment and employee stock purchase plans	1,824		1,757
Proceeds from exercise of stock options	1,045		94
Cash dividends paid	(17,680)		(17,555)
Net cash provided by financing activities	576,090		983,723
Net increase in cash and cash equivalents	682,499		262,548
Cash and cash equivalents at beginning of year	219,858		125,128
Cash and cash equivalents at end of period	$	902,357	$	387,676

Three Months Ended March 31,
(Dollars in thousands) 2021 2020
Cash flows from operating activities:
Net income $ 32,603 $ 838
Adjustments to reconcile net income to net cash provided by operating activities:
(Reversal of provision) provision for credit losses (11,283) 21,843
Depreciation of premises and equipment 1,173 1,258
Net amortization of investment securities premiums and discounts 768 383
Net gain on sales of investment securities (65) (695)
Net gain on mortgage banking activities (5,938) (2,744)
Bank owned life insurance income (717) (734)
Stock-based compensation 874 435
Intangible expenses 249 330
Other adjustments to reconcile net income to cash (used in) provided by operating activities (2,036) 273
Originations of loans held for sale (142,877) (63,730)
Proceeds from the sale of loans held for sale 163,052 58,959
Contributions to pension and other postretirement benefit plans (66) (68)
Increase in accrued interest receivable and other assets (5,488) (2,752)
Decrease in accrued interest payable and other liabilities (376) (2,544)
Net cash provided by operating activities 29,873 11,052
Cash flows from investing activities:
Proceeds from sale of premises and equipment 0 8
Purchases of premises and equipment (1,311) (387)
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 12,708 12,896
Proceeds from sales of securities available-for-sale 1,563 62,276
Purchases of investment securities held-to-maturity (4,625) (43,116)
Purchases of investment securities available-for-sale (32,540) (32,242)
Proceeds from sales of money market mutual funds 2,020 4,753
Purchases of money market mutual funds (2,150) (4,644)
Net decrease (increases) in other investments 2,612 (211)
Net increase in loans and leases (108,296) (62,368)
Net cash used in investing activities (109,822) (50,560)
Cash flows from financing activities:
Net increase in deposits 68,869 47,229
Net increase (decrease) in short-term borrowings 8,770 (265)
Proceeds from issuance of long-term debt 0 125,000
Repayment of long-term debt (15,000) (65,000)
Repayment of subordinated debt (10,000) 0
Payment of contingent consideration on acquisitions (29) (31)
Purchases of treasury stock (650) (4,438)
Stock issued under dividend reinvestment and employee stock purchase plans 609 572
Proceeds from exercise of stock options 759 94
Cash dividends paid (5,920) (5,879)
Net cash provided by financing activities 47,408 97,282
Net (decrease) increase in cash and cash equivalents (32,541) 57,774
Cash and cash equivalents at beginning of year 219,858 125,128
Cash and cash equivalents at end of period $ 187,317 $ 182,902
Supplemental disclosures of cash flow information:
Cash paid for interest $ 6,856 $ 9,420
Cash paid for income taxes, net of refunds 130 32
Non cash transactions:
Transfer of loans to other real estate owned $ 126 $ 0


	Nine Months Ended September 30,
(Dollars in thousands)	2021		2020
Supplemental disclosures of cash flow information:
Cash paid for interest	$	18,516	$	23,089
Cash paid for income taxes, net of refunds	22,327		12,014
Non cash transactions:
Transfer of loans to other real estate owned	$	126	$	8,125
Transfer of loans to loans held for sale	996		14,416

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

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 ~~period~~or nine-month periods ended ~~March 31,~~September 30, 2021 are not necessarily indicative of the results that may be expected for the year ended December 31, 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~~Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 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 ~~determination~~calculation of the allowance for credit losses.

Accounting Pronouncements Adopted in 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)(1) amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year; 2)(2) the amount and timing of plan assets expected to be returned to the employer; and 3)(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)(1) the weighted-average interest crediting rates used in an entity's cash balance pension plans and other similar plans and 2)(2) explanations for reasons for significant changes in the benefit obligation or plan assets. These amendments are to be applied retrospectively. This ASU became effective on January 1, 2021 for the Corporation. The adoption of this ASU did not have a material impact on the Corporation's financial statement disclosures but will result in the elimination of certain disclosures for retirement plans and other postretirement 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 became effective on January 1, 2021 for the Corporation. The adoption of this ASU 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 and the adoption of the ASU will have a material impact on the Corporation's financial statements.

In August 2020, the FASB issued ASU No. 2020-06, "Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)." This guidance simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the 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 embedded derivatives accounted for as assets or liabilities. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and 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 Corporation. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.

In 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 elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the 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 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 potential impact of the provisions of this ASU in connection with its ongoing evaluation of ASU No. 2020-04.

811

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, 2020.


		Three Months Ended				Three Months Ended				Nine Months Ended
		March 31,				September 30,				September 30,
(Dollars and shares in thousands, except per share data)	(Dollars and shares in thousands, except per share data)	2021		2020			(Dollars and shares in thousands, except per share data)	2021		2020		2021		2020
Numerator:	Numerator:						Numerator:
Net income	Net income	$	32,603	$	838		Net income	$	20,911	$	18,119	$	74,389	$	21,042
Net income allocated to unvested restricted stock awards	Net income allocated to unvested restricted stock awards	(37)		0			Net income allocated to unvested restricted stock awards	—		(23)		(28)		(29)
Net income allocated to common shares	Net income allocated to common shares	$	32,566	$	838		Net income allocated to common shares	$	20,911	$	18,096	$	74,361	$	21,013
Denominator:	Denominator:						Denominator:
Weighted average shares outstanding	Weighted average shares outstanding	29,329		29,286			Weighted average shares outstanding	29,420		29,227		29,380		29,233
Average unvested restricted stock awards	Average unvested restricted stock awards	(32)		(68)			Average unvested restricted stock awards	—		(38)		(10)		(47)
Denominator for basic earnings per share—weighted-average shares outstanding	Denominator for basic earnings per share—weighted-average shares outstanding	29,297		29,218			Denominator for basic earnings per share—weighted-average shares outstanding	29,420		29,189		29,370		29,186
Effect of dilutive securities—employee stock options and restricted stock units	Effect of dilutive securities—employee stock options and restricted stock units	135		65			Effect of dilutive securities—employee stock options and restricted stock units	142		28		143		32
Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	29,432		29,283			Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	29,562		29,217		29,513		29,218
Basic earnings per share	Basic earnings per share	$	1.11	$	0.03		Basic earnings per share	$	0.71	$	0.62	$	2.53	$	0.72
Diluted earnings per share	Diluted earnings per share	$	1.11	$	0.03		Diluted earnings per share	$	0.71	$	0.62	$	2.52	$	0.72
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	315		329			Average antidilutive options and restricted stock units excluded from computation of diluted earnings per share	286		526		289		509

912

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 ~~March 31,~~September 30, 2021 and December 31, 2020, by contractual maturity within each type:

At March 31, 2021
(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:
Within 1 year $ 5,000 $ 87 $ 0 $ 0 $ 5,087
After 1 year to 5 years 1,999 51 0 0 2,050
6,999 138 0 0 7,137
Residential mortgage-backed securities:
After 5 years to 10 years 5,683 248 0 0 5,931
Over 10 years 122,471 3,916 (157) 0 126,230
128,154 4,164 (157) 0 132,161
Total $ 135,153 $ 4,302 $ (157) $ 0 $ 139,298
Securities Available-for-Sale
State and political subdivisions:
After 1 year to 5 years $ 3,562 $ 22 $ 0 $ 0 $ 3,584
After 5 years to 10 years 6,602 24 0 0 6,626
10,164 46 0 0 10,210
Residential mortgage-backed securities:
After 1 year to 5 years 287 10 0 0 297
After 5 years to 10 years 1,498 58 0 0 1,556
Over 10 years 132,250 1,184 (1,896) 0 131,538
134,035 1,252 (1,896) 0 133,391
Collateralized mortgage obligations:
After 5 years to 10 years 694 20 0 0 714
Over 10 years 3,943 0 0 0 3,943
4,637 20 0 0 4,657
Corporate bonds:
Within 1 year 998 9 0 0 1,007
After 1 year to 5 years 29,480 1,239 (56) (6) 30,657
After 5 years to 10 years 60,000 150 (764) (479) 58,907
90,478 1,398 (820) (485) 90,571
Total $ 239,314 $ 2,716 $ (2,716) $ (485) $ 238,829


	At September 30, 2021
(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:
Within 1 year	$	6,999	$	72	$	—	$	—	$	7,071

	6,999		72		—		—		7,071
Residential mortgage-backed securities:
After 5 years to 10 years	5,761		251		—		—		6,012
Over 10 years	99,883		3,067		(372)		—		102,578
	105,644		3,318		(372)		—		108,590




Total	$	112,643	$	3,390	$	(372)	$	—	$	115,661
Securities Available-for-Sale









State and political subdivisions:

After 1 year to 5 years	$	2,325	$	8	$	—	$	—	$	2,333


	2,325		8		—		—		2,333
Residential mortgage-backed securities:

After 1 year to 5 years	214		7		—		—		221
After 5 years to 10 years	1,785		73		—		—		1,858
Over 10 years	179,675		1,101		(2,013)		—		178,763
	181,674		1,181		(2,013)		—		180,842
Collateralized mortgage obligations:

After 5 years to 10 years	528		13		—		—		541
Over 10 years	3,158		9		—		—		3,167
	3,686		22		—		—		3,708
Corporate bonds:
Within 1 year	3,500		15		—		—		3,515
After 1 year to 5 years	27,738		1,056		(14)		(23)		28,757
After 5 years to 10 years	60,000		—		(590)		(792)		58,618

	91,238		1,071		(604)		(815)		90,890
Total	$	278,923	$	2,282	$	(2,617)	$	(815)	$	277,773

1013


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

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

State and political subdivisions:	State and political subdivisions:											State and political subdivisions:

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

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

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

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

		90,493		1,445		(5,450)		(869)		85,619			90,493		1,445		(5,450)		(869)		85,619
Total	Total	$	221,254	$	3,783	$	(5,528)	$	(869)	$	218,640	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 ~~$248.9~~$298.4 million and $249.6 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, were pledged to secure public funds deposits and other contractual obligations. In addition, securities of ~~$15.5~~$25.1 million and $32.6 million were pledged to secure credit derivatives and interest rate swaps at ~~March 31,~~September 30, 2021 and December 31, 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 ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020:


		Three Months Ended March 31,					Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		(Dollars in thousands)	2021		2020
Securities available-for-sale:	Securities available-for-sale:					Securities available-for-sale:
Proceeds from sales	Proceeds from sales	$	1,563	$	62,276	Proceeds from sales	$	4,135	$	65,621
Gross realized gains on sales	Gross realized gains on sales	65		709		Gross realized gains on sales	140		831
Gross realized losses on sales	Gross realized losses on sales	0		14		Gross realized losses on sales	—		14
Tax expense related to net realized gains on sales	Tax expense related to net realized gains on sales	14		146		Tax expense related to net realized gains on sales	29		172

At ~~March 31,~~September 30, 2021 and December 31, 2020, there were 0no reportable investments in any single issuer representing more than 10% of shareholders’ equity.

1114

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 ~~March 31,~~September 30, 2021 and December 31, 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 March 31, 2021
At September 30, 2021														At September 30, 2021
Securities Held-to-Maturity	Securities Held-to-Maturity													Securities Held-to-Maturity

Residential mortgage-backed securities	Residential mortgage-backed securities	$	4,462	$	(157)	$	0	$	0	$	4,462	$	(157)	Residential mortgage-backed securities	$	14,360	$	(372)	$	—	$	—	$	14,360	$	(372)

Total	Total	$	4,462	$	(157)	$	0	$	0	$	4,462	$	(157)	Total	$	14,360	$	(372)	$	—	$	—	$	14,360	$	(372)
Securities Available-for-Sale	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)	Residential mortgage-backed securities	$	133,703	$	(1,878)	$	3,124	$	(135)	$	136,827	$	(2,013)

Corporate bonds														Corporate bonds	1,412		(1)		—		—		1,412		(1)
Total	Total	$	77,457	$	(1,895)	$	29	$	(1)	$	77,486	$	(1,896)	Total	$	135,115	$	(1,879)	$	3,124	$	(135)	$	138,239	$	(2,014)
At December 31, 2020	At December 31, 2020													At December 31, 2020
Securities Held-to-Maturity	Securities Held-to-Maturity													Securities Held-to-Maturity

Total	Total	$	0	$	0	$	0	$	0	$	0	$	0	Total	$	—	$	—	$	—	$	—	$	—	$	—
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)		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)		Collateralized mortgage obligations	4,545		(15)		—		—		4,545		(15)

Total	Total	$	18,222	$	(77)	$	31	$	(1)	$	18,253	$	(78)	Total	$	18,222	$	(77)	$	31	$	(1)	$	18,253	$	(78)

At ~~March 31,~~September 30, 2021, the fair value of held-to-maturity securities in an unrealized loss position for which an allowance for credit losses has not been recorded was ~~$4.5~~$14.4 million, including unrealized losses of ~~$157~~$372 thousand. These holdings were comprised of ~~two~~six federal agency mortgage-backed securities, which are 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. The Corporation did not recognize any credit losses on held-to-maturity debt securities for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 or ~~March 31,~~September 30, 2020. Accrued interest receivable on held-to-maturity debt securities totaled ~~$357~~$286 thousand at ~~March 31,~~September 30, 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,~~September 30, 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~~$138.2 million, including unrealized losses of ~~$1.9~~$2.0 million. These holdings were comprised of 16twenty-nine federal agency mortgage-backed securities, which are 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.~~losses, and three investment grade corporate bonds. 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~~$593 thousand at ~~March 31,~~September 30, 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.

1215

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


(Dollars in thousands)	Corporate Bonds
~~Three~~Nine months ended ~~March 31,~~September 30, 2021
Securities Available-for-Sale
Beginning balance	$	(869)
Additions for securities for which no previous expected credit losses were recognized	~~(19)~~(22)
Change in securities for which a previous expected credit loss was recognized	~~403~~76
Ending balance	$	~~(485)~~(815)
~~Three~~Nine months ended ~~March 31,~~September 30, 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)~~(1)
Change in securities for which a previous expected credit loss was recognized	~~(572)~~(391)
Ending balance	$	~~(897)~~(692)

At ~~March 31,~~September 30, 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 ~~$52.6~~$62.6 million, including unrealized losses of ~~$820 thousand,~~$1.4 million, and allowance for credit losses of ~~$485~~$815 thousand. These holdings were comprised of 1314 investment grade corporate bonds which fluctuate in value based on changes in market conditions. For these securities, 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 reversal of the provision for credit losses of ~~$403~~$76 thousand for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 was primarily related to the improvement in fair value of six ~~underlying~~ securities that are tied to the 10-year swap curve, which had ~~significantly~~ steepened during ~~the quarter.~~2021.

The Corporation recognized a ~~$115~~$164 thousand net gain and a ~~$268~~$321 thousand net loss on equity securities during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, respectively, in other noninterest income. There were 0no sales of equity securities during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 or ~~March 31,~~September 30, 2020.

Note 4. Loans and Leases

Summary of Major Loan and Lease Categories


(Dollars in thousands)	(Dollars in thousands)	At March 31, 2021		At December 31, 2020		(Dollars in thousands)	At September 30, 2021		At December 31, 2020
Commercial, financial and agricultural	Commercial, financial and agricultural	$	871,996	$	892,665	Commercial, financial and agricultural	$	927,015	$	892,665
Paycheck Protection Program	Paycheck Protection Program	528,452		483,773		Paycheck Protection Program	85,601		483,773
Real estate-commercial	Real estate-commercial	2,531,700		2,458,872		Real estate-commercial	2,669,898		2,458,872
Real estate-construction	Real estate-construction	249,652		243,355		Real estate-construction	260,874		243,355
Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	387,801		381,446		Real estate-residential secured for business purpose	412,001		381,446
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	494,349		487,600		Real estate-residential secured for personal purpose	535,705		487,600
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	162,529		166,609		Real estate-home equity secured for personal purpose	159,029		166,609
Loans to individuals	Loans to individuals	25,468		27,482		Loans to individuals	26,458		27,482
Lease financings	Lease financings	163,059		165,039		Lease financings	175,464		165,039
Total loans and leases held for investment, net of deferred income	Total loans and leases held for investment, net of deferred income	$	5,415,006	$	5,306,841	Total loans and leases held for investment, net of deferred income	$	5,252,045	$	5,306,841
Less: Allowance for credit losses, loans and leases	Less: Allowance for credit losses, loans and leases	(71,497)		(83,044)		Less: Allowance for credit losses, loans and leases	(70,146)		(83,044)
Net loans and leases held for investment	Net loans and leases held for investment	$	5,343,509	$	5,223,797	Net loans and leases held for investment	$	5,181,899	$	5,223,797
Imputed interest on lease financings, included in the above table	Imputed interest on lease financings, included in the above table	$	(17,283)	$	(17,670)	Imputed interest on lease financings, included in the above table	$	(18,445)	$	(17,670)
Net deferred fees, included in the above table		(4,967)		(2,903)
Net deferred costs (fees), included in the above table						Net deferred costs (fees), included in the above table	1,696		(2,903)
Overdraft deposits included in the above table	Overdraft deposits included in the above table	4,705		948		Overdraft deposits included in the above table	3,267		948

1316

Age Analysis of Past Due Loans and Leases

The following presents, by class of loans and leases held for investment, an aging of past due loans and leases, loans and leases which are current and nonaccrual loans and leases at ~~March 31,~~September 30, 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 March 31, 2021
At September 30, 2021																		At September 30, 2021
Commercial, financial and agricultural	Commercial, financial and agricultural	$	1,195	$	0	$	40	$	1,235	$	868,755	$	869,990	$	2,006	$	871,996	Commercial, financial and agricultural	$	1,177	$	49	$	2,000	$	3,226	$	922,856	$	926,082	$	933	$	927,015
Paycheck Protection Program	Paycheck Protection Program	0		0		0		0		528,452		528,452		0		528,452		Paycheck Protection Program	95		—		—		95		85,506		85,601		—		85,601
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	3,893		88		0		3,981		2,505,693		2,509,674		22,026		2,531,700		Commercial real estate	1,343		—		—		1,343		2,640,259		2,641,602		28,296		2,669,898
Construction	Construction	1,164		0		0		1,164		248,488		249,652		0		249,652		Construction	—		—		—		—		260,874		260,874		—		260,874
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	2,364		660		0		3,024		381,918		384,942		2,859		387,801		Residential secured for business purpose	789		344		—		1,133		408,399		409,532		2,469		412,001
Residential secured for personal purpose	Residential secured for personal purpose	1,014		0		403		1,417		491,065		492,482		1,867		494,349		Residential secured for personal purpose	2,025		—		—		2,025		531,601		533,626		2,079		535,705
Home equity secured for personal purpose	Home equity secured for personal purpose	682		132		0		814		160,626		161,440		1,089		162,529		Home equity secured for personal purpose	301		42		—		343		157,965		158,308		721		159,029
Loans to individuals	Loans to individuals	73		33		123		229		25,239		25,468		0		25,468		Loans to individuals	215		16		58		289		26,169		26,458		—		26,458
Lease financings	Lease financings	290		324		98		712		162,198		162,910		149		163,059		Lease financings	655		654		146		1,455		173,979		175,434		30		175,464
Total	Total	$	10,675	$	1,237	$	664	$	12,576	$	5,372,434	$	5,385,010	$	29,996	$	5,415,006	Total	$	6,600	$	1,105	$	2,204	$	9,909	$	5,207,608	$	5,217,517	$	34,528	$	5,252,045


		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 December 31, 2020	At December 31, 2020																	At December 31, 2020
Commercial, financial and agricultural	Commercial, financial and agricultural	$	1,104	$	279	$	50	$	1,433	$	888,405	$	889,838	$	2,827	$	892,665	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		Paycheck Protection Program	—		—		—		—		483,773		483,773		—		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	3,230		859		945		5,034		2,431,099		2,436,133		22,739		2,458,872		Commercial real estate	3,230		859		945		5,034		2,431,099		2,436,133		22,739		2,458,872
Construction	Construction	361		0		0		361		242,994		243,355		0		243,355		Construction	361		—		—		361		242,994		243,355		—		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	3,726		603		0		4,329		374,331		378,660		2,786		381,446		Residential secured for business purpose	3,726		603		—		4,329		374,331		378,660		2,786		381,446
Residential secured for personal purpose	Residential secured for personal purpose	6,057		80		0		6,137		479,377		485,514		2,086		487,600		Residential secured for personal purpose	6,057		80		—		6,137		479,377		485,514		2,086		487,600
Home equity secured for personal purpose	Home equity secured for personal purpose	607		32		0		639		164,923		165,562		1,047		166,609		Home equity secured for personal purpose	607		32		—		639		164,923		165,562		1,047		166,609
Loans to individuals	Loans to individuals	190		74		185		449		27,033		27,482		0		27,482		Loans to individuals	190		74		185		449		27,033		27,482		—		27,482
Lease financings	Lease financings	898		291		212		1,401		163,431		164,832		207		165,039		Lease financings	898		291		212		1,401		163,431		164,832		207		165,039
Total	Total	$	16,173	$	2,218	$	1,392	$	19,783	$	5,255,366	$	5,275,149	$	31,692	$	5,306,841	Total	$	16,173	$	2,218	$	1,392	$	19,783	$	5,255,366	$	5,275,149	$	31,692	$	5,306,841

1417

Nonperforming Loans and Leases

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


		At March 31, 2021								At December 31, 2020									At September 30, 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	$	2,006	$	0	$	40	$	2,046	$	2,827	$	0	$	50	$	2,877	Commercial, financial and agricultural	$	933	$	—	$	2,000	$	2,933	$	2,827	$	—	$	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	22,026		0		0		22,026		22,739		0		945		23,684		Commercial real estate	28,296		—		—		28,296		22,739		—		945		23,684

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	2,859		0		0		2,859		2,786		0		0		2,786		Residential secured for business purpose	2,469		—		—		2,469		2,786		—		—		2,786
Residential secured for personal purpose	Residential secured for personal purpose	1,867		0		403		2,270		2,086		0		0		2,086		Residential secured for personal purpose	2,079		—		—		2,079		2,086		—		—		2,086
Home equity secured for personal purpose	Home equity secured for personal purpose	1,089		52		0		1,141		1,047		53		0		1,100		Home equity secured for personal purpose	721		51		—		772		1,047		53		—		1,100
Loans to individuals	Loans to individuals	0		0		123		123		0		0		185		185		Loans to individuals	—		—		58		58		—		—		185		185
Lease financings	Lease financings	149		0		98		247		207		0		212		419		Lease financings	30		—		146		176		207		—		212		419
Total	Total	$	29,996	$	52	$	664	$	30,712	$	31,692	$	53	$	1,392	$	33,137	Total	$	34,528	$	51	$	2,204	$	36,783	$	31,692	$	53	$	1,392	$	33,137

*Includes nonaccrual troubled debt restructured loans of ~~$13.5~~$2.4 million and $14.1 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

The following table presents the amortized cost basis of loans and leases held for investment on nonaccrual status and loans and leases held for investment 90 days or more past due and still accruing as of ~~March 31,~~September 30, 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 March 31, 2021
At September 30, 2021										At September 30, 2021
Commercial, financial and agricultural	Commercial, financial and agricultural	$	1,647	$	359	$	2,006	$	40	Commercial, financial and agricultural	$	933	$	—	$	933	$	2,000
Real estate-commercial	Real estate-commercial	22,026		0		22,026		0		Real estate-commercial	28,213		83		28,296		—

Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	2,832		27		2,859		0		Real estate-residential secured for business purpose	2,469		—		2,469		—
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	1,740		127		1,867		403		Real estate-residential secured for personal purpose	2,079		—		2,079		—
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	1,089		0		1,089		0		Real estate-home equity secured for personal purpose	721		—		721		—
Loans to individuals	Loans to individuals	0		0		0		123		Loans to individuals	—		—		—		58
Lease financings	Lease financings	0		149		149		98		Lease financings	—		30		30		146
Total	Total	$	29,334	$	662	$	29,996	$	664	Total	$	34,415	$	113	$	34,528	$	2,204
At December 31, 2020	At December 31, 2020									At December 31, 2020
Commercial, financial and agricultural	Commercial, financial and agricultural	$	2,187	$	640	$	2,827	$	50	Commercial, financial and agricultural	$	2,187	$	640	$	2,827	$	50
Real estate-commercial	Real estate-commercial	22,739		0		22,739		945		Real estate-commercial	22,739		—		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 business purpose	2,663		123		2,786		—
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	1,958		128		2,086		0		Real estate-residential secured for personal purpose	1,958		128		2,086		—
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	1,047		0		1,047		0		Real estate-home equity secured for personal purpose	1,047		—		1,047		—
Loans to individuals	Loans to individuals	0		0		0		185		Loans to individuals	—		—		—		185
Lease financings	Lease financings	0		207		207		212		Lease financings	—		207		207		212
Total	Total	$	30,594	$	1,098	$	31,692	$	1,392	Total	$	30,594	$	1,098	$	31,692	$	1,392

For the nine months ended September 30, 2021, $9 thousand of interest income was recognized on nonaccrual loans and leases.

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

(Dollars in thousands) Real Estate
Other (1)
None (2)
Total
At March 31, 2021
Commercial, financial and agricultural $ 874 $ 1,132 $ 0 $ 2,006
Real estate-commercial 22,026 0 0 22,026
Real estate-residential secured for business purpose 2,859 0 0 2,859
Real estate-residential secured for personal purpose 1,867 0 0 1,867
Real estate-home equity secured for personal purpose 1,089 0 0 1,089
Total $ 28,715 $ 1,132 $ 0 $ 29,847
At December 31, 2020
Commercial, financial and agricultural $ 1,351 $ 1,194 $ 282 $ 2,827
Real estate-commercial 22,739 0 0 22,739
Real estate-residential secured for business purpose 2,786 0 0 2,786
Real estate-residential secured for personal purpose 2,086 0 0 2,086
Real estate-home equity secured for personal purpose 1,047 0 0 1,047
Total $ 30,009 $ 1,194 $ 282 $ 31,485


(Dollars in thousands)	Real Estate		Other (1)		None (2)		Total
At September 30, 2021
Commercial, financial and agricultural	$	281	$	477	$	175	$	933
Real estate-commercial	28,296		—		—		28,296

Real estate-residential secured for business purpose	2,469		—		—		2,469
Real estate-residential secured for personal purpose	2,079		—		—		2,079
Real estate-home equity secured for personal purpose	721		—		—		721

Total	$	33,846	$	477	$	175	$	34,498

(Dollars in thousands)	Real Estate		Other (1)		None (3)		Total
At December 31, 2020
Commercial, financial and agricultural	$	1,351	$	1,194	$	282	$	2,827
Real estate-commercial	22,739		—		—		22,739

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

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

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

(2) Loans fully guaranteed by the SBA.

(3) Loans fully reserved given lack of collateral.

Credit Quality Indicators

The Corporation categorizes risk based on relevant information about the ability of the borrower to service their debt. Loans with a relationship balance of less than $1 million are reviewed when necessary based on their performance, 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, 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

Based on the most recent analysis performed, the following 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 ~~March 31,~~September 30, 2021 and December 31, 2020.


		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total		(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
At March 31, 2021
At September 30, 2021																		At September 30, 2021
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural																	Commercial, Financial and Agricultural
Risk Rating	Risk Rating																	Risk Rating
1. Pass	1. Pass	$	69,723	$	146,523	$	90,985	$	71,413	$	34,561	$	64,820	$	374,556	$	852,581	1. Pass	$	148,549	$	101,422	$	75,241	$	55,694	$	25,859	$	53,712	$	436,226	$	896,703
2. Special Mention	2. Special Mention	0		2,680		783		299		408		1,766		6,280		12,216		2. Special Mention	—		5,257		2,560		440		487		1,372		14,609		24,725
3. Substandard	3. Substandard	0		0		36		145		17		714		6,287		7,199		3. Substandard	—		—		30		69		15		295		5,178		5,587

Total	Total	$	69,723	$	149,203	$	91,804	$	71,857	$	34,986	$	67,300	$	387,123	$	871,996	Total	$	148,549	$	106,679	$	77,831	$	56,203	$	26,361	$	55,379	$	456,013	$	927,015

Paycheck Protection Program	Paycheck Protection Program																	Paycheck Protection Program
Risk Rating	Risk Rating																	Risk Rating
1. Pass	1. Pass	$	161,718	$	366,734	$	0	$	0	$	0	$	0	$	0	$	528,452	1. Pass	$	80,766	$	4,835	$	—	$	—	$	—	$	—	$	—	$	85,601
2. Special Mention	2. Special Mention	0		0		0		0		0		0		0		0		2. Special Mention	—		—		—		—		—		—		—		—
3. Substandard	3. Substandard	0		0		0		0		0		0		0		0		3. Substandard	—		—		—		—		—		—		—		—

Total	Total	$	161,718	$	366,734	$	0	$	0	$	0	$	0	$	0	$	528,452	Total	$	80,766	$	4,835	$	—	$	—	$	—	$	—	$	—	$	85,601

Real Estate-Commercial	Real Estate-Commercial																	Real Estate-Commercial
Risk Rating	Risk Rating																	Risk Rating
1. Pass	1. Pass	$	207,223	$	1,011,644	$	466,297	$	202,198	$	255,578	$	262,380	$	40,041	$	2,445,361	1. Pass	$	582,442	$	927,367	$	428,304	$	167,225	$	229,552	$	197,290	$	43,313	$	2,575,493
2. Special Mention	2. Special Mention	0		6,173		26,482		3,472		0		6,992		1,248		44,367		2. Special Mention	2,490		9,963		25,574		3,421		919		5,691		1,323		49,381
3. Substandard	3. Substandard	0		12,274		4,597		6,647		11,154		6,964		336		41,972		3. Substandard	—		32,071		3,405		2,038		1,849		5,554		107		45,024

Total	Total	$	207,223	$	1,030,091	$	497,376	$	212,317	$	266,732	$	276,336	$	41,625	$	2,531,700	Total	$	584,932	$	969,401	$	457,283	$	172,684	$	232,320	$	208,535	$	44,743	$	2,669,898

Real Estate-Construction	Real Estate-Construction																	Real Estate-Construction
Risk Rating	Risk Rating																	Risk Rating
1. Pass	1. Pass	$	28,695	$	100,814	$	56,044	$	34,940	$	124	$	2,949	$	4,821	$	228,387	1. Pass	$	97,157	$	66,437	$	47,603	$	16,330	$	198	$	—	$	9,616	$	237,341
2. Special Mention	2. Special Mention	0		21,265		0		0		0		0		0		21,265		2. Special Mention	3,033		500		—		20,000		—		—		—		23,533
3. Substandard	3. Substandard	0		0		0		0		0		0		0		0		3. Substandard	—		—		—		—		—		—		—		—

Total	Total	$	28,695	$	122,079	$	56,044	$	34,940	$	124	$	2,949	$	4,821	$	249,652	Total	$	100,190	$	66,937	$	47,603	$	36,330	$	198	$	—	$	9,616	$	260,874

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	$	55,096	$	105,094	$	61,128	$	45,109	$	39,084	$	51,891	$	24,543	$	381,945	1. Pass	$	131,220	$	90,933	$	55,887	$	36,180	$	31,894	$	33,800	$	26,619	$	406,533
2. Special Mention	2. Special Mention	0		1,343		0		187		75		304		0		1,909		2. Special Mention	—		1,078		214		—		74		1,100		—		2,466
3. Substandard	3. Substandard	0		27		985		50		46		2,008		831		3,947		3. Substandard	—		—		—		46		29		2,350		577		3,002

Total	Total	$	55,096	$	106,464	$	62,113	$	45,346	$	39,205	$	54,203	$	25,374	$	387,801	Total	$	131,220	$	92,011	$	56,101	$	36,226	$	31,997	$	37,250	$	27,196	$	412,001

Totals By Risk Rating	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	1. Pass	$	1,040,134	$	1,190,994	$	607,035	$	275,429	$	287,503	$	284,802	$	515,774	$	4,201,671
2. Special Mention	2. Special Mention	0		31,461		27,265		3,958		483		9,062		7,528		79,757		2. Special Mention	5,523		16,798		28,348		23,861		1,480		8,163		15,932		100,105
3. Substandard	3. Substandard	0		12,301		5,618		6,842		11,217		9,686		7,454		53,118		3. Substandard	—		32,071		3,435		2,153		1,893		8,199		5,862		53,613

Total	Total	$	522,455	$	1,774,571	$	707,337	$	364,460	$	341,047	$	400,788	$	458,943	$	4,569,601	Total	$	1,045,657	$	1,239,863	$	638,818	$	301,443	$	290,876	$	301,164	$	537,568	$	4,355,389

1721


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

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

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

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

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

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

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

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

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	$	118,925	$	72,149	$	52,775	$	43,347	$	37,768	$	25,170	$	25,510	$	375,644	1. Pass	$	118,925	$	72,149	$	52,775	$	43,347	$	37,768	$	25,170	$	25,510	$	375,644
2. Special Mention	2. Special Mention	1,354		0		188		77		175		130		0		1,924		2. Special Mention	1,354		—		188		77		175		130		—		1,924
3. Substandard	3. Substandard	28		991		50		64		1,065		962		718		3,878		3. Substandard	28		991		50		64		1,065		962		718		3,878

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

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

Total	Total	$	2,001,595	$	723,898	$	395,275	$	362,654	$	205,604	$	254,149	$	516,936	$	4,460,111	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 ~~March 31,~~September 30, 2021 ~~and~~or December 31, 2020. The Corporation had 0no loans with a risk rating of Doubtful included within recorded investment in loans and leases held for investment at ~~March 31,~~September 30, 2021 ~~and~~or December 31, 2020.

1822

The Corporation monitors the credit risk profile by payment activity for the following classifications of loans and leases: Real-estate residential secured for personal purpose loans, Real-estate home equity secured for personal purpose loans, Loans to individuals and 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.

Based on the most recent analysis performed, the following table presents ~~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 ~~March 31,~~September 30, 2021 and December 31, 2020.


		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total		(Dollars in thousands)	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost Basis		Total
At March 31, 2021
At September 30, 2021																		At September 30, 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	$	65,849	$	186,428	$	51,724	$	37,244	$	37,472	$	112,249	$	1,113	$	492,079	1. Performing	$	174,244	$	171,641	$	38,776	$	27,575	$	26,533	$	94,642	$	215	$	533,626
2. Nonperforming	2. Nonperforming	0		1,065		0		55		0		1,150		0		2,270		2. Nonperforming	54		643		—		371		—		1,011		—		2,079
Total	Total	$	65,849	$	187,493	$	51,724	$	37,299	$	37,472	$	113,399	$	1,113	$	494,349	Total	$	174,298	$	172,284	$	38,776	$	27,946	$	26,533	$	95,653	$	215	$	535,705

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	$	311	$	1,061	$	601	$	724	$	1,105	$	2,367	$	155,219	$	161,388	1. Performing	$	641	$	953	$	478	$	514	$	887	$	1,811	$	152,973	$	158,257
2. Nonperforming	2. Nonperforming	0		0		0		186		0		33		922		1,141		2. Nonperforming	—		—		—		182		—		65		525		772
Total	Total	$	311	$	1,061	$	601	$	910	$	1,105	$	2,400	$	156,141	$	162,529	Total	$	641	$	953	$	478	$	696	$	887	$	1,876	$	153,498	$	159,029

Loans to Individuals	Loans to Individuals																	Loans to Individuals
Payment Performance	Payment Performance																	Payment Performance
1. Performing	1. Performing	$	263	$	1,305	$	1,183	$	823	$	342	$	2,180	$	19,249	$	25,345	1. Performing	$	1,337	$	1,019	$	850	$	543	$	157	$	1,982	$	20,512	$	26,400
2. Nonperforming	2. Nonperforming	0		0		0		0		0		123		0		123		2. Nonperforming	—		—		—		—		—		58		—		58
Total	Total	$	263	$	1,305	$	1,183	$	823	$	342	$	2,303	$	19,249	$	25,468	Total	$	1,337	$	1,019	$	850	$	543	$	157	$	2,040	$	20,512	$	26,458

Lease Financings	Lease Financings																	Lease Financings
Payment Performance	Payment Performance																	Payment Performance
1. Performing	1. Performing	$	15,160	$	67,256	$	42,254	$	26,121	$	9,364	$	2,657	$	0	$	162,812	1. Performing	$	59,726	$	57,225	$	32,465	$	19,328	$	5,838	$	706	$	—	$	175,288
2. Nonperforming	2. Nonperforming	0		0		23		3		216		5		0		247		2. Nonperforming	23		16		66		12		5		54		—		176
Total	Total	$	15,160	$	67,256	$	42,277	$	26,124	$	9,580	$	2,662	$	0	$	163,059	Total	$	59,749	$	16	$	32,531	$	19,340	$	5,843	$	760	$	—	$	175,464

Totals by Payment Performance	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	1. Performing	$	235,948	$	230,838	$	72,569	$	47,960	$	33,415	$	99,141	$	173,700	$	893,571
2. Nonperforming	2. Nonperforming	0		1,065		23		244		216		1,311		922		3,781		2. Nonperforming	77		659		66		565		5		1,188		525		3,085
Total	Total	$	81,583	$	257,115	$	95,785	$	65,156	$	48,499	$	120,764	$	176,503	$	845,405	Total	$	236,025	$	231,497	$	72,635	$	48,525	$	33,420	$	100,329	$	174,225	$	896,656

1923


		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total		(Dollars in thousands)	2020		2019		2018		2017		2016		Prior		Revolving Loans Amortized Cost Basis		Total
At December 31, 2020	At December 31, 2020																	At December 31, 2020
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	$	191,987	$	61,880	$	56,314	$	50,983	$	38,975	$	84,138	$	1,237	$	485,514	1. Performing	$	191,987	$	61,880	$	56,314	$	50,983	$	38,975	$	84,138	$	1,237	$	485,514
2. Nonperforming	2. Nonperforming	666		0		56		0		0		1,364		0		2,086		2. Nonperforming	666		—		56		—		—		1,364		—		2,086
Total	Total	$	192,653	$	61,880	$	56,370	$	50,983	$	38,975	$	85,502	$	1,237	$	487,600	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	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	$	1,195	$	815	$	829	$	1,160	$	518	$	2,189	$	158,803	$	165,509	1. Performing	$	1,195	$	815	$	829	$	1,160	$	518	$	2,189	$	158,803	$	165,509
2. Nonperforming	2. Nonperforming	0		0		198		0		0		36		866		1,100		2. Nonperforming	—		—		198		—		—		36		866		1,100
Total	Total	$	1,195	$	815	$	1,027	$	1,160	$	518	$	2,225	$	159,669	$	166,609	Total	$	1,195	$	815	$	1,027	$	1,160	$	518	$	2,225	$	159,669	$	166,609

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

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

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

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 and nine months ended ~~March 31,~~September 30, 2021 primarily due to favorable changes in ~~economic~~economic-related assumptions, which were impacted by the ongoing recovery from the COVID-19 pandemic, partially offset by loan ~~growth.~~growth and a qualitative factor adjustment related to expected losses resulting from severe weather-related damages. There were no changes to the reasonable and supportable forecast period, the reversion period, or any other significant methodology changes during the three or nine months ended ~~March 31,~~September 30, 2021. The following presents, by portfolio segment, a summary of the activity in the allowance for credit losses, loans and leases, for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020:


(Dollars in thousands)	(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		(Dollars in thousands)	Beginning balance		Provision (reversal of provision) for credit losses		Charge-offs		Recoveries		Ending balance
Three Months Ended March 31, 2021
Three Months Ended September 30, 2021														Three Months Ended September 30, 2021
Allowance for credit losses, loans and leases:														Allowance for credit losses, loans and leases:
Commercial, Financial and Agricultural														Commercial, Financial and Agricultural	$	11,734	$	450	$	(787)	$	789	$	12,186
Paycheck Protection Program														Paycheck Protection Program	3		(1)		—		—		2
Real Estate-Commercial														Real Estate-Commercial	43,194		(1,809)		(72)		193		41,506
Real Estate-Construction														Real Estate-Construction	3,649		205		—		—		3,854
Real Estate-Residential Secured for Business Purpose														Real Estate-Residential Secured for Business Purpose	6,747		(218)		—		2		6,531
Real Estate-Residential Secured for Personal Purpose														Real Estate-Residential Secured for Personal Purpose	2,620		(129)		—		—		2,491
Real Estate-Home Equity Secured for Personal Purpose														Real Estate-Home Equity Secured for Personal Purpose	1,124		(49)		—		1		1,076
Loans to Individuals														Loans to Individuals	319		76		(59)		18		354
Lease Financings														Lease Financings	1,815		204		(34)		24		2,009
Unallocated														Unallocated	150		(13)		N/A		N/A		137
Total														Total	$	71,355	$	(1,284)	$	(952)	$	1,027	$	70,146
Three Months Ended September 30, 2020														Three Months Ended September 30, 2020
Allowance for credit losses, loans and leases:	Allowance for credit losses, loans and leases:													Allowance for credit losses, loans and leases:
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural	$	13,584	$	0	$	(3,078)	$	(338)	$	65	$	10,233	Commercial, Financial and Agricultural	$	16,736	$	(2,401)	$	(142)	$	354	$	14,547
Real Estate-Commercial	Real Estate-Commercial	52,230		0		(6,771)		0		0		45,459		Real Estate-Commercial	50,671		7,481		—		—		58,152
Real Estate-Construction	Real Estate-Construction	3,298		0		(499)		0		0		2,799		Real Estate-Construction	4,130		355		—		—		4,485
Real Estate-Residential Secured for Business Purpose	Real Estate-Residential Secured for Business Purpose	7,317		0		(679)		0		54		6,692		Real Estate-Residential Secured for Business Purpose	8,180		251		(88)		23		8,366
Real Estate-Residential Secured for Personal Purpose	Real Estate-Residential Secured for Personal Purpose	3,055		0		1		0		0		3,056		Real Estate-Residential Secured for Personal Purpose	2,669		47		—		—		2,716
Real Estate-Home Equity Secured for Personal Purpose	Real Estate-Home Equity Secured for Personal Purpose	1,176		0		79		0		2		1,257		Real Estate-Home Equity Secured for Personal Purpose	1,071		204		—		4		1,279
Loans to Individuals	Loans to Individuals	533		0		(58)		(56)		28		447		Loans to Individuals	771		(170)		(69)		17		549
Lease Financings	Lease Financings	1,701		0		(254)		(91)		48		1,404		Lease Financings	1,839		(149)		(149)		85		1,626
Unallocated	Unallocated	150		0		0		N/A		N/A		150		Unallocated	150		—		N/A		N/A		150
Total	Total	$	83,044	$	0	$	(11,259)	$	(485)	$	197	$	71,497	Total	$	86,217	$	5,618	$	(448)	$	483	$	91,870
Three Months Ended March 31, 2020
Allowance for credit losses, loans and leases:
Commercial, Financial and Agricultural		$	8,759	$	5,284	$	5,630	$	(481)	$	52	$	19,244
Real Estate-Commercial		15,750		6,208		12,817		0		35		34,810
Real Estate-Construction		2,446		29		642		0		0		3,117
Real Estate-Residential Secured for Business Purpose		2,622		2,502		782		(3)		3		5,906
Real Estate-Residential Secured for Personal Purpose		2,713		(706)		114		0		0		2,121
Real Estate-Home Equity Secured for Personal Purpose		1,076		(364)		78		0		5		795
Loans to Individuals		470		104		47		(35)		14		600
Lease Financings		1,311		(135)		376		(152)		73		1,473
Unallocated		184		0		(34)		N/A		N/A		150
Total		$	35,331	$	12,922	$	20,452	$	(671)	$	182	$	68,216

N//A – Not applicable


(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
Nine Months Ended September 30, 2021
Allowance for credit losses, loans and leases:
Commercial, Financial and Agricultural	$	13,584	$	—	$	(939)	$	(1,475)	$	1,016	$	12,186
Paycheck Protection Program	—		—		2		—		—		2
Real Estate-Commercial	52,230		—		(10,927)		(595)		798		41,506
Real Estate-Construction	3,298		—		556		—		—		3,854
Real Estate-Residential Secured for Business Purpose	7,317		—		(637)		(227)		78		6,531
Real Estate-Residential Secured for Personal Purpose	3,055		—		(564)		—		—		2,491
Real Estate-Home Equity Secured for Personal Purpose	1,176		—		(125)		—		25		1,076
Loans to Individuals	533		—		(127)		(138)		86		354
Lease Financings	1,701		—		332		(143)		119		2,009
Unallocated	150		—		(13)		N/A		N/A		137
Total	$	83,044	$	—	$	(12,442)	$	(2,578)	$	2,122	$	70,146
Nine Months Ended September 30, 2020
Allowance for credit losses, loans and leases:
Commercial, Financial and Agricultural	$	8,759	$	5,284	$	1,195	$	(1,367)	$	676	$	14,547
Real Estate-Commercial	15,750		6,208		38,961		(2,802)		35		58,152
Real Estate-Construction	2,446		29		2,010		—		—		4,485
Real Estate-Residential Secured for Business Purpose	2,622		2,502		3,398		(187)		31		8,366
Real Estate-Residential Secured for Personal Purpose	2,713		(706)		709		—		—		2,716
Real Estate-Home Equity Secured for Personal Purpose	1,076		(364)		555		—		12		1,279
Loans to Individuals	470		104		116		(197)		56		549
Lease Financings	1,311		(135)		737		(513)		226		1,626
Unallocated	184		—		(34)		N/A		N/A		150
Total	$	35,331	$	12,922	$	47,647	$	(5,066)	$	1,036	$	91,870

N/A – Not applicable

2126

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 ~~March 31,~~September 30, 2021 and 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 March 31, 2021
At September 30, 2021																At September 30, 2021
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural	$	253	$	9,980	$	10,233	$	2,006	$	869,990	$	0	$	871,996	Commercial, Financial and Agricultural	$	—	$	12,186	$	12,186	$	933	$	926,082	$	—	$	927,015
Paycheck Protection Program	Paycheck Protection Program	0		0		0		0		528,452		0		528,452		Paycheck Protection Program	—		2		2		—		85,601		—		85,601
Real Estate-Commercial	Real Estate-Commercial	0		45,459		45,459		22,026		2,509,522		152		2,531,700		Real Estate-Commercial	15		41,491		41,506		28,296		2,641,520		82		2,669,898
Real Estate-Construction	Real Estate-Construction	0		2,799		2,799		0		249,652		0		249,652		Real Estate-Construction	—		3,854		3,854		—		260,874		—		260,874
Real Estate-Residential Secured for Business Purpose	Real Estate-Residential Secured for Business Purpose	3		6,689		6,692		2,859		384,942		0		387,801		Real Estate-Residential Secured for Business Purpose	—		6,531		6,531		2,469		409,532		—		412,001
Real Estate-Residential Secured for Personal Purpose	Real Estate-Residential Secured for Personal Purpose	25		3,031		3,056		1,867		492,482		0		494,349		Real Estate-Residential Secured for Personal Purpose	—		2,491		2,491		2,079		533,626		—		535,705
Real Estate-Home Equity Secured for Personal Purpose	Real Estate-Home Equity Secured for Personal Purpose	0		1,257		1,257		1,089		161,440		0		162,529		Real Estate-Home Equity Secured for Personal Purpose	—		1,076		1,076		721		158,308		—		159,029
Loans to Individuals	Loans to Individuals	0		447		447		0		25,468		0		25,468		Loans to Individuals	—		354		354		—		26,458		—		26,458
Lease Financings	Lease Financings	0		1,404		1,404		0		163,059		0		163,059		Lease Financings	—��		2,009		2,009		—		175,464		—		175,464
Unallocated	Unallocated	N/A		150		150		N/A		N/A		N/A		N/A		Unallocated	N/A		137		137		N/A		N/A		N/A		N/A
Total	Total	$	281	$	71,216	$	71,497	$	29,847	$	5,385,007	$	152	$	5,415,006	Total	$	15	$	70,131	$	70,146	$	34,498	$	5,217,465	$	82	$	5,252,045
At March 31, 2020
At September 30, 2020																At September 30, 2020
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural	$	698	$	18,546	$	19,244	$	3,934	$	940,255	$	0	$	944,189	Commercial, Financial and Agricultural	$	891	$	13,656	$	14,547	$	3,809	$	890,505	$	—	$	894,314
Paycheck Protection Program																Paycheck Protection Program	$	—	$	—	$	—	$	—	$	501,580	$	—	$	501,580
Real Estate-Commercial	Real Estate-Commercial	1,547		33,263		34,810		28,827		2,071,584		288		2,100,699		Real Estate-Commercial	19		58,133		58,152		20,464		2,349,006		221		2,369,691
Real Estate-Construction	Real Estate-Construction	0		3,117		3,117		0		215,150		0		215,150		Real Estate-Construction	—		4,485		4,485		—		233,590		—		233,590
Real Estate-Residential Secured for Business Purpose	Real Estate-Residential Secured for Business Purpose	95		5,811		5,906		1,270		376,374		0		377,644		Real Estate-Residential Secured for Business Purpose	1		8,365		8,366		2,151		376,088		—		378,239
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-Residential Secured for Personal Purpose	181		2,535		2,716		2,395		472,293		—		474,688
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		Real Estate-Home Equity Secured for Personal Purpose	—		1,279		1,279		948		171,500		—		172,448
Loans to Individuals	Loans to Individuals	0		600		600		0		29,170		0		29,170		Loans to Individuals	—		549		549		—		27,771		—		27,771
Lease Financings	Lease Financings	0		1,473		1,473		0		149,570		0		149,570		Lease Financings	—		1,626		1,626		—		159,535		—		159,535
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	$	2,535	$	65,681	$	68,216	$	36,131	$	4,412,406	$	288	$	4,448,825	Total	$	1,092	$	90,778	$	91,870	$	29,767	$	5,181,868	$	221	$	5,211,856

N/A – Not applicable

Troubled Debt Restructured Loans

~~There were no~~The following presents, by class of loans, ~~that were restructured during the three months ended March 31, 2021 or March 31, 2020.~~information regarding troubled debt restructurings of accruing and nonaccrual loans:


	Three Months Ended September 30, 2021					Three Months Ended September 30, 2020
(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:





Total	—	$	—	$	—		—	$	—	$	—
Nonaccrual Troubled Debt Restructured Loans:

Real estate—commercial real estate	3	$	200	$	198		—	$	—	$	—

Real estate—residential secured for personal purpose	—	—		—			1	544		544
Total	3	$	200	$	198		1	$	544	$	544


	Nine Months Ended September 30, 2021					Nine Months Ended September 30, 2020
(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:





Total	—	$	—	$	—		—	$	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	$	—		1	$	619	$	619
Real estate—commercial real estate	3	200		198			—	—		—

Real estate—residential secured for personal purpose	—	—		—			1	544		544
Total	3	$	200	$	198		2	$	1,163	$	1,163

The Corporation modified certain loans and leases via principal and/or interest deferrals 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 have not categorized these modifications as troubled debt restructurings. These ~~loan~~loans and leases had a combined principal balance of approximately ~~$73.0~~$18.1 million as of ~~March 31,~~September 30, 2021, which represents approximately ~~1.5%~~0.3% of the loan portfolio, excluding PPP loans.

The following presents, by class of loans, information regarding the types of concessions granted on accruing and nonaccrual loans that were restructured during the three and nine months ended September 30, 2021 and 2020.


	Amortization Period Extension
(Dollars in thousands)		No. of Loans	Amount
Three Months Ended September 30, 2021
Accruing Troubled Debt Restructured Loans:




Total		—	$	—
Nonaccrual Troubled Debt Restructured Loans:

Real estate—commercial real estate		3	$	198

Total		3	$	198
Three Months Ended September 30, 2020
Accruing Troubled Debt Restructured Loans:





Total		—	$	—
Nonaccrual Troubled Debt Restructured Loans:



Real estate—residential secured for personal purpose		1	$	544
Total		1	$	544
Nine Months Ended September 30, 2021
Accruing Troubled Debt Restructured Loans:




Total		—	$	—
Nonaccrual Troubled Debt Restructured Loans:

Real estate—commercial real estate		3	$	198


Total		3	$	198
Nine Months Ended September 30, 2020
Accruing Troubled Debt Restructured Loans:





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


Real estate—residential secured for personal purpose		1	544
Total		2	$	1,163

There were no accruing or nonaccrual troubled debt restructured loans for which there were payment defaults within twelve months of the restructuring date for the three and nine months ended ~~March 31,~~September 30, 2021 or ~~March 31,~~September 30, 2020.

~~The~~0The following presents the amount of consumer mortgages collateralized by residential real estate property that were in the process of foreclosure at ~~March 31,~~September 30, 2021 ~~and~~or December 31, 2020:

(Dollars in thousands) At March 31, 2021 At December 31, 2020
Real estate-residential secured for personal purpose $ 57 $ 64
Total $ 57 $ 64


(Dollars in thousands)	At September 30, 2021		At December 31, 2020
Real estate-residential secured for personal purpose	$	—	$	64

Total	$	—	$	64

There was no foreclosed residential real estate property included in other real estate owned at ~~March 31,~~September 30, 2021 ~~and~~or December 31, 2020.

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 March 31, 2021		At December 31, 2020		(Dollars in thousands)	At September 30, 2021		At December 31, 2020
2021 (excluding the three months ended March 31, 2021)		$	47,581	$	61,724
2021 (excluding the nine months ended September 30, 2021)						2021 (excluding the nine months ended September 30, 2021)	$	15,484	$	61,724
2022	2022	53,034		49,970		2022	63,076		49,970
2023	2023	38,736		35,631		2023	48,916		35,631
2024	2024	23,604		20,821		2024	33,363		20,821
2025	2025	10,937		8,319		2025	19,605		8,319
Thereafter	Thereafter	3,044		2,763		Thereafter	9,756		2,763
Total future minimum lease payments receivable	Total future minimum lease payments receivable	176,936		179,228		Total future minimum lease payments receivable	190,200		179,228
Plus: Unguaranteed residual	Plus: Unguaranteed residual	938		914		Plus: Unguaranteed residual	1,124		914
Plus: Initial direct costs	Plus: Initial direct costs	2,468		2,567		Plus: Initial direct costs	2,585		2,567
Less: Imputed interest	Less: Imputed interest	(17,283)		(17,670)		Less: Imputed interest	(18,445)		(17,670)
Lease financings	Lease financings	$	163,059	$	165,039	Lease financings	$	175,464	$	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.

Changes in the carrying amount of the Corporation's goodwill by business segment for the ~~three~~nine months ended ~~March 31,~~September 30, 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, 2020	Balance at December 31, 2020	$	138,476	$	15,434	$	18,649	$	172,559	Balance at December 31, 2020	$	138,476	$	15,434	$	18,649	$	172,559
Addition to goodwill from acquisitions	Addition to goodwill from acquisitions	0		0		0		0		Addition to goodwill from acquisitions	—		—		—		—
Balance at March 31, 2021		$	138,476	$	15,434	$	18,649	$	172,559
Balance at September 30, 2021										Balance at September 30, 2021	$	138,476	$	15,434	$	18,649	$	172,559

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

At March 31, 2021 At December 31, 2020
(Dollars in thousands) Gross Carrying Amount
Accumulated Amortization (1)
Net Carrying Amount Gross Carrying Amount
Accumulated Amortization (1)
Net Carrying Amount
Amortized intangible assets:
Core deposit intangibles $ 6,788 $ 4,960 $ 1,829 $ 6,788 $ 4,787 $ 2,001
Customer related intangibles 6,017 5,635 381 7,604 7,147 457
Servicing rights 23,667 16,652 7,015 22,354 15,946 6,408
Total amortized intangible assets $ 36,472 $ 27,247 $ 9,225 $ 36,746 $ 27,880 $ 8,866


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


Core deposit intangibles	$	6,788	$	5,277	$	1,511	$	6,788	$	4,787	$	2,001
Customer related intangibles	6,017		5,779		238		7,604		7,147		457
Servicing rights	25,679		18,069		7,610		22,354		15,946		6,408
Total amortized intangible assets	$	38,484	$	29,125	$	9,359	$	36,746	$	27,880	$	8,866

(1) Included within accumulated amortization is a valuation allowance of $1$18 thousand and $87 thousand on mortgage servicing rights at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

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


Year	Year	(Dollars in thousands)	Amount		Year	(Dollars in thousands)	Amount
Remainder of 2021	Remainder of 2021		$	675	Remainder of 2021		$	214
2022	2022		666		2022		666
2023	2023		409		2023		409
2024	2024		267		2024		267
2025	2025		144		2025		145
Thereafter	Thereafter		49		Thereafter		48
Total	Total		$	2,210	Total		$	1,749

The aggregate fair value of mortgage servicing rights was ~~$9.5~~$10.1 million and $6.7 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. The fair value of mortgage servicing rights was determined using a discount rate of 10.0% at ~~March 31,~~September 30, 2021 and December 31, 2020.

Changes in the servicing rights balance are summarized as follows:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020			(Dollars in thousands)	2021		2020		2021		2020
Beginning of period	Beginning of period	$	6,408	$	6,626		Beginning of period	$	7,433	$	6,081	$	6,408	$	6,626
Servicing rights capitalized	Servicing rights capitalized	1,313		526			Servicing rights capitalized	872		900		3,325		2,261

Amortization of servicing rights	Amortization of servicing rights	(792)		(657)			Amortization of servicing rights	(678)		(834)		(2,192)		(2,402)
Changes in valuation allowance	Changes in valuation allowance	86		(55)			Changes in valuation allowance	(17)		132		69		(206)
End of period	End of period	$	7,015	$	6,440		End of period	$	7,610	$	6,279	$	7,610	$	6,279
Loans serviced for others	Loans serviced for others	$	1,255,124	$	1,087,174		Loans serviced for others	$	1,326,364	$	1,167,316	$	1,326,364	$	1,167,316

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


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020			(Dollars in thousands)	2021		2020		2021		2020
Valuation allowance, beginning of period	Valuation allowance, beginning of period	$	(87)	$	0		Valuation allowance, beginning of period	$	(1)	$	(338)	$	(87)	$	—
Additions	Additions	0		(55)			Additions	(17)		—		—		(206)
Reductions	Reductions	86		0			Reductions	—		132		69		—

Valuation allowance, end of period	Valuation allowance, end of period	$	(1)	$	(55)		Valuation allowance, end of period	$	(18)	$	(206)	$	(18)	$	(206)

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


Year	Year	(Dollars in thousands)	Amount		Year	(Dollars in thousands)	Amount
Remainder of 2021	Remainder of 2021		$	1,307	Remainder of 2021		$	1,426
2022	2022		1,077		2022		1,174
2023	2023		885		2023		964
2024	2024		725		2024		790
2025	2025		593		2025		646
Thereafter	Thereafter		2,428		Thereafter		2,610
Total	Total		$	7,015	Total		$	7,610

Note 6. Deposits

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


		At March 31, 2021				At December 31, 2020					At September 30, 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	0	%	$	1,857,547	0	%	$	1,690,663	Noninterest-bearing deposits	—	%	$	1,861,007	—	%	$	1,690,663
Demand deposits	Demand deposits	0.19		2,006,368		0.22		2,070,183		Demand deposits	0.20		2,588,316		0.22		2,070,183
Savings deposits	Savings deposits	0.09		973,466		0.08		918,094		Savings deposits	0.09		994,791		0.08		918,094
Time deposits	Time deposits	1.31		474,211		1.30		563,775		Time deposits	1.12		494,040		1.30		563,775
Total	Total	0.21	%	$	5,311,592	0.24	%	$	5,242,715	Total	0.20	%	$	5,938,154	0.24	%	$	5,242,715

The aggregate amount of time deposits in denominations of $100 thousand or more was ~~$226.3~~$253.7 million at ~~March 31,~~September 30, 2021 and $296.7 million at December 31, 2020. Deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC. Deposit insurance per account owner is currently $250 thousand. The aggregate amount of time deposits in denominations over $250 thousand was ~~$91.7~~$122.5 million at ~~March 31,~~September 30, 2021 and $161.6 million at December 31, 2020.

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


Year	Year	(Dollars in thousands)	Amount		Year	(Dollars in thousands)	Amount
Remainder of 2021	Remainder of 2021		$	11,944	Remainder of 2021		$	6,973
2022	2022		174,693		2022		68,581
2023	2023		118,952		2023		209,744
2024	2024		124,004		2024		145,565
2025	2025		27,477		2025		38,595
Thereafter	Thereafter		17,141		Thereafter		24,582
Total	Total		$	474,211	Total		$	494,040

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 March 31, 2021				At December 31, 2020					At September 30, 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	$	26,676	0.05	%	$	17,906	0.05	%	Customer repurchase agreements	$	14,101	0.05	%	$	17,906	0.05	%

Long-term debt:	Long-term debt:									Long-term debt:
FHLB advances	FHLB advances	$	95,000	1.34	%	$	110,000	1.42	%	FHLB advances	$	95,000	1.34	%	$	110,000	1.42	%

Subordinated notes	Subordinated notes	$	173,617	5.02	%	$	183,515	4.96	%	Subordinated notes	$	98,797	5.31	%	$	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 ~~$2.3~~$2.4 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 ~~March 31,~~September 30, 2021 and December 31, 2020, the Bank had outstanding short-term letters of credit with the FHLB totaling ~~$560.7~~$937.6 million and $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 ~~$1.6~~$1.4 billion at ~~March 31,~~September 30, 2021.

The Corporation, through the Bank, holds collateral at the Federal Reserve Bank of Philadelphia ~~(the FRB of Philadelphia)~~ to provide access to the Discount Window Lending program. The collateral, consisting of investment securities, was valued at ~~$37.7~~$31.5 million and $40.7 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. At ~~March 31,~~September 30, 2021 and December 31, 2020, the Corporation had 0no outstanding borrowings under the Discount Window Lending program.

The Corporation has a $10.0 million committed line of credit with a correspondent bank. At ~~March 31,~~September 30, 2021 and December 31, 2020, the Corporation had 0no outstanding borrowings under this line.

The Corporation and the Bank ~~have $2.3~~had $2.4 billion and $2.2 billion of committed borrowing capacity at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, of which ~~$1.7~~$1.4 billion and $1.5 billion was available as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. The Corporation, through the Bank, also maintained uncommitted funding sources from correspondent banks of $400.0 million and $460.0 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, which were fully available. Future availability under these lines is subject to the prerogatives of the granting banks and may be withdrawn at will.

Long-term advances with the FHLB mature as follows:


(Dollars in thousands)	(Dollars in thousands)	As of March 31, 2021		Weighted Average Rate		(Dollars in thousands)	As of September 30, 2021		Weighted Average Rate
Remainder of 2021	Remainder of 2021	$	0	0	%	Remainder of 2021	$	—	—	%
2022	2022	0		0		2022	—		—
2023	2023	35,000		1.94		2023	35,000		1.94
2024	2024	60,000		0.98		2024	60,000		0.98
2025	2025	0		0		2025	—		—
Thereafter	Thereafter	0		0		Thereafter	—		—
Total	Total	$	95,000	1.34	%	Total	$	95,000	1.34	%

Note 8. Retirement Plans and Other Postretirement Benefits

Information with respect to the Retirement Plans and Other Postretirement Benefits follows:


		Three Months Ended March 31,									Three Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020
(Dollars in thousands)	(Dollars in thousands)	Retirement Plans				Other Post Retirement Benefits				(Dollars in thousands)	Retirement Plans				Other Post Retirement Benefits
Service cost	Service cost	$	130	$	117	$	36	$	28	Service cost	$	164	$	117	$	36	$	27
Interest cost	Interest cost	354		417		21		24		Interest cost	366		425		21		23
Expected loss on plan assets		(892)		(816)		0		0
Expected return on plan assets										Expected return on plan assets	(946)		(816)		—		—
Amortization of net actuarial loss	Amortization of net actuarial loss	317		291		12		6		Amortization of net actuarial loss	318		300		11		7

Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	(91)	$	9	$	69	$	58	Net periodic benefit (income) cost	$	(98)	$	26	$	68	$	57


	Nine Months Ended September 30,
	2021		2020		2021		2020
(Dollars in thousands)	Retirement Plans				Other Post Retirement Benefits
Service cost	$	425	$	350	$	107	$	82
Interest cost	1,073		1,259		64		72
Expected return on plan assets	(2,739)		(2,450)		—		—
Amortization of net actuarial loss	952		882		35		19

Net periodic benefit (income) cost	$	(289)	$	41	$	206	$	173

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

The Corporation previously disclosed in its financial statements for the year ended December 31, 2020 that it expected to make contributions of $156 thousand to its non-qualified retirement plans and $94 thousand to its other postretirement benefit plans in 2021. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, the Corporation contributed ~~$39~~$117 thousand to its non-qualified retirement plans and ~~$27~~$81 thousand to its other postretirement plans. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~$664 thousand~~$2.0 million was paid to participants from the retirement plans and ~~$27~~$81 thousand was paid to participants from the other postretirement plans.

Note 9. Stock-Based Incentive Plan

The Corporation 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") 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 ~~three~~nine months ended ~~March 31,~~September 30, 2021:


(Dollars in thousands, except per share data)	(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		(Dollars in thousands, except per share data)	Shares Under Option	Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value at September 30, 2021
Outstanding at December 31, 2020	Outstanding at December 31, 2020	453,785	$	25.06				Outstanding at December 31, 2020	453,785	$	25.06

Forfeited	Forfeited	(9,500)	28.33					Forfeited	(9,500)	28.33
Exercised	Exercised	(36,286)	20.90					Exercised	(49,527)	21.07
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
Outstanding at September 30, 2021								Outstanding at September 30, 2021	394,758	25.48		5.2	$	1,015
Exercisable at September 30, 2021								Exercisable at September 30, 2021	394,758	25.48		5.2	1,015

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

(Dollars in thousands, except per share data) Nonvested Stock Options Weighted Average Grant Date Fair Value
Nonvested stock options at December 31, 2020 49,771 $ 6.46
Vested (49,771) 6.46
Nonvested stock options at March 31, 2021 0 0


(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 September 30, 2021	—	—

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

The following is a summary of nonvested restricted stock awards and nonvested restricted stock units at ~~March 31,~~September 30, 2021 including changes during the ~~three~~nine 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, 2020	Nonvested stock awards and units at December 31, 2020	305,704	$	21.18	Nonvested stock awards and units at December 31, 2020	305,704	$	21.18
Granted	Granted	139,007	27.67		Granted	155,607	27.81
Vested	Vested	(85,731)	22.68		Vested	(87,075)	22.71
Cancelled	Cancelled	(9,953)	22.35		Cancelled	(14,396)	22.88

Nonvested stock units at March 31, 2021		349,027	23.37
Nonvested stock units at September 30, 2021					Nonvested stock units at September 30, 2021	359,840	23.61

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


		Three Months Ended March 31,					Nine Months Ended September 30,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2021		2020		(Dollars in thousands, except per share data)	2021		2020
Restricted stock units granted	Restricted stock units granted	139,007		179,080		Restricted stock units granted	155,607		179,080
Weighted average grant date fair value	Weighted average grant date fair value	$	27.67	$	18.62	Weighted average grant date fair value	$	27.81	$	18.62
Intrinsic value of units granted	Intrinsic value of units granted	$	3,847	$	2,923	Intrinsic value of units granted	$	4,328	$	3,335
Restricted stock awards and units vested	Restricted stock awards and units vested	85,731		57,355		Restricted stock awards and units vested	87,075		59,855
Weighted average grant date fair value	Weighted average grant date fair value	$	22.68	$	27.23	Weighted average grant date fair value	$	22.71	$	27.17
Intrinsic value of awards and units vested	Intrinsic value of awards and units vested	$	2,354	$	1,335	Intrinsic value of awards and units vested	$	2,391	$	1,375

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


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

Restricted stock units	Restricted stock units	$	6,925	2.3	Restricted stock units	$	5,484	2.0
		$	6,925	2.3		$	5,484	2.0

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


		Three Months Ended March 31,					Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		(Dollars in thousands)	2021		2020
Stock-based compensation expense:	Stock-based compensation expense:					Stock-based compensation expense:
Stock options	Stock options	$	62	$	108	Stock options	$	62	$	274
Restricted stock awards and units	Restricted stock awards and units	812		327		Restricted stock awards and units	2,612		1,579
Employee stock purchase plan	Employee stock purchase plan	23		20		Employee stock purchase plan	72		65
Total	Total	$	897	$	455	Total	$	2,746	$	1,918
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	$	33	$	106	Tax benefit on nonqualified stock option expense, restricted stock awards and disqualifying dispositions of incentive stock options	$	389	$	375

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)	(Dollars in thousands)	Net Unrealized (Losses) Gains on Available-for-Sale Investment Securities		Net Change Related to Derivatives Used for Cash Flow Hedges		Net Change Related to Defined Benefit Pension Plans		Accumulated Other Comprehensive (Loss) Income		(Dollars in thousands)	Net Unrealized (Losses) Gains on Available-for-Sale Investment Securities		Net Change Related to Derivatives Used for Cash Flow Hedges		Net Change Related to Defined Benefit Pension Plans		Accumulated Other Comprehensive (Loss) Income
Balance, December 31, 2020	Balance, December 31, 2020	$	(1,379)	$	(421)	$	(20,344)	$	(22,144)	Balance, December 31, 2020	$	(1,379)	$	(421)	$	(20,344)	$	(22,144)
Other comprehensive income	Other comprehensive income	1,379		65		260		1,704		Other comprehensive income	1,114		177		780		2,071
Balance, March 31, 2021		$	0	$	(356)	$	(20,084)	$	(20,440)
Balance, September 30, 2021										Balance, September 30, 2021	$	(265)	$	(244)	$	(19,564)	$	(20,073)

Balance, December 31, 2019	Balance, December 31, 2019	$	(3,231)	$	(185)	$	(18,314)	$	(21,730)	Balance, December 31, 2019	$	(3,231)	$	(185)	$	(18,314)	$	(21,730)
Adjustment to initially apply ASU No. 2016-13 for CECL	Adjustment to initially apply ASU No. 2016-13 for CECL	237		0		0		237		Adjustment to initially apply ASU No. 2016-13 for CECL	237		—		—		237
Other comprehensive (loss) income		(4,000)		(370)		235		(4,135)
Balance, March 31, 2020		$	(6,994)	$	(555)	$	(18,079)	$	(25,628)
Other comprehensive income (loss)										Other comprehensive income (loss)	1,980		(299)		712		2,393
Balance, September 30, 2020										Balance, September 30, 2020	$	(1,014)	$	(484)	$	(17,602)	$	(19,100)

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 that were originated in 2013 with balances totaling $29.1 million at time of the ~~hedge, that were originated in 2013.~~hedge. 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 ~~March 31,~~September 30, 2021, approximately ~~$233~~$228 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 ~~March 31,~~September 30, 2021. At ~~March 31,~~September 30, 2021, the notional amount of the interest rate swap was ~~$15.3~~$14.8 million and the fair value was a liability of ~~$450~~$309 thousand.

The Corporation has an interest rate swap with a current notional amount of ~~$147~~$80 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 issuing the swap.

At ~~March 31,~~September 30, 2021, the Corporation reported ~~110~~123 variable-rate to fixed-rate interest rate swap transactions between the third-party financial institution and customers with a current notional amount of ~~$707.3~~$762.4 million and remaining maturities ranging from 126 months to 10 years. At ~~March 31,~~September 30, 2021, the fair value of the Corporation's interest rate swap credit derivatives was a liability of ~~$271~~$350 thousand. At ~~March 31,~~September 30, 2021, the fair value of the swaps to the customers was a net liability of ~~$15.5~~$18.2 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.

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 ~~March 31,~~September 30, 2021 and December 31, 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 March 31, 2021
At September 30, 2021										At September 30, 2021
Interest rate swap - cash flow hedge	Interest rate swap - cash flow hedge	$	15,255		$	0	Other liabilities	$	450	Interest rate swap - cash flow hedge	$	14,828		$	—	Other liabilities	$	309

Total	Total	$	15,255		$	0		$	450	Total	$	14,828		$	—		$	309
At December 31, 2020	At December 31, 2020									At December 31, 2020
Interest rate swap - cash flow hedge	Interest rate swap - cash flow hedge	$	15,465		$	0	Other liabilities	$	533	Interest rate swap - cash flow hedge	$	15,465		$	—	Other liabilities	$	533

Total	Total	$	15,465		$	0		$	533	Total	$	15,465		$	—		$	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 ~~March 31,~~September 30, 2021 and December 31, 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 March 31, 2021
At September 30, 2021										At September 30, 2021
Interest rate swap	Interest rate swap	$	147		$	0	Other liabilities	$	5	Interest rate swap	$	80		$	—	Other liabilities	$	2
Credit derivatives	Credit derivatives	707,333			0		Other liabilities	271		Credit derivatives	762,420			—		Other liabilities	350
Interest rate locks with customers	Interest rate locks with customers	97,001		Other assets	1,163			0		Interest rate locks with customers	55,227		Other assets	1,256			—
Forward loan sale commitments	Forward loan sale commitments	119,637		Other assets	1,222			0		Forward loan sale commitments	84,320		Other assets	167			—
Total	Total	$	924,118		$	2,385		$	276	Total	$	902,047		$	1,423		$	352
At December 31, 2020	At December 31, 2020									At December 31, 2020
Interest rate swap	Interest rate swap	$	179		$	0	Other liabilities	$	8	Interest rate swap	$	179		$	—	Other liabilities	$	8
Credit derivatives	Credit derivatives	643,556			0		Other liabilities	535		Credit derivatives	643,556			—		Other liabilities	535
Interest rate locks with customers	Interest rate locks with customers	77,246		Other assets	2,894			0		Interest rate locks with customers	77,246		Other assets	2,894			—
Forward loan sale commitments	Forward loan sale commitments	112,690			0		Other liabilities	752		Forward loan sale commitments	112,690			—		Other liabilities	752
Total	Total	$	833,671		$	2,894		$	1,295	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				Statement of Income Classification		Three Months Ended			Nine Months Ended
			March 31,						September 30,			September 30,
(Dollars in thousands)	(Dollars in thousands)		2021		2020				Statement of Income Classification	2021		2020		2021		2020

Interest rate swap—cash flow hedge—net interest payments	Interest rate swap—cash flow hedge—net interest payments	Interest expense	$	76	$	29		Interest rate swap—cash flow hedge—net interest payments		$	77	$	78	$	229	$	176

Total net loss	Total net loss		$	(76)	$	(29)		Total net loss				$	(77)	$	(78)	$	(229)	$	(176)

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				Statement of Income Classification		Three Months Ended			Nine Months Ended
			March 31,						September 30,			September 30,
(Dollars in thousands)	(Dollars in thousands)		2021		2020				Statement of Income Classification	2021		2020		2021		2020

Credit derivatives	Credit derivatives	Other noninterest income	$	1,107	$	140		Credit derivatives		$	487	$	2,339	$	1,866	$	4,143
Interest rate locks with customers	Interest rate locks with customers	Net (loss) gain on mortgage banking activities	(1,730)		2,512			Interest rate locks with customers		Net (loss) gain on mortgage banking activities		(406)		1,442		(1,637)		4,496
Forward loan sale commitments	Forward loan sale commitments	Net gain (loss) on mortgage banking activities	1,974		(867)			Forward loan sale commitments	Net gain (loss) on mortgage banking activities	434		108		919		(455)
Total net gain	Total net gain		$	1,351	$	1,785		Total net gain		$	515	$	3,889	$	1,148	$	8,184

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


(Dollars in thousands)	(Dollars in thousands)	Accumulated Other Comprehensive (Loss) Income	At March 31, 2021		At December 31, 2020		(Dollars in thousands)	Accumulated Other Comprehensive (Loss) Income	At September 30, 2021		At December 31, 2020
Interest rate swap—cash flow hedge	Interest rate swap—cash flow hedge	Fair value, net of taxes	$	(356)	$	(421)	Interest rate swap—cash flow hedge	Fair value, net of taxes	$	(244)	$	(421)
Total	Total		$	(356)	$	(421)	Total		$	(244)	$	(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.

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

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

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

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

Investment Securities

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

Fair values for securities are determined using independent pricing services and market-participating brokers. The Corporation’s independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available 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 ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2021 since lending credit risk is not an observable input for this loan. The unrealized gain on the 1 loan was $4$1 thousand at ~~March 31,~~September 30, 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.

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


		At March 31, 2021									At September 30, 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	$	0	$	10,210	$	0	$	10,210	State and political subdivisions	$	—	$	2,333	$	—	$	2,333
Residential mortgage-backed securities	Residential mortgage-backed securities	0		133,391		0		133,391		Residential mortgage-backed securities	—		180,842		—		180,842
Collateralized mortgage obligations	Collateralized mortgage obligations	0		4,657		0		4,657		Collateralized mortgage obligations	—		3,708		—		3,708
Corporate bonds	Corporate bonds	0		80,971		9,600		90,571		Corporate bonds	—		81,265		9,625		90,890
Total available-for-sale securities	Total available-for-sale securities	0		229,229		9,600		238,829		Total available-for-sale securities	—		268,148		9,625		277,773
Equity securities:	Equity securities:									Equity securities:
Equity securities - financial services industry	Equity securities - financial services industry	933		0		0		933		Equity securities - financial services industry	982		—		—		982
Money market mutual funds	Money market mutual funds	2,591		0		0		2,591		Money market mutual funds	1,979		—		—		1,979
Total equity securities	Total equity securities	3,524		0		0		3,524		Total equity securities	2,961		—		—		2,961
Loans*	Loans*	0		0		152		152		Loans*	—		—		82		82
Loans held for sale	Loans held for sale	0		22,636		0		22,636		Loans held for sale	—		29,093		—		29,093

Interest rate locks with customers*	Interest rate locks with customers*	0		1,163		0		1,163		Interest rate locks with customers*	—		1,256		—		1,256
Forward loan sale commitments*	Forward loan sale commitments*	0		1,222		0		1,222		Forward loan sale commitments*	—		167		—		167
Total assets	Total assets	$	3,524	$	254,250	$	9,752	$	267,526	Total assets	$	2,961	$	298,664	$	9,707	$	311,332
Liabilities:	Liabilities:									Liabilities:
Contingent consideration liability		$	0	$	0	$	28	$	28

Interest rate swaps*	Interest rate swaps*	0		455		0		455		Interest rate swaps*	$	—	$	311	$	—	$	311
Credit derivatives*	Credit derivatives*	0		0		271		271		Credit derivatives*	—		—		350		350

Total liabilities	Total liabilities	$	0	$	455	$	299	$	754	Total liabilities	$	—	$	311	$	350	$	661

* 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 utilizes a third party to estimate fair value. The value is derived from a discounted cash flow analysis which utilizes a probability of default input. The ~~$271~~$350 thousand of credit derivatives liability represents the Credit Valuation Adjustment (CVA), which is obtained from real-time financial market data, of ~~110~~123 interest rate swaps with a current notional amount of ~~$707.3~~$762.4 million. The ~~March 31,~~September 30, 2021 CVA assumes a zero-deal recovery percentage based on the most recent index credit curve.

3340


		At December 31, 2020									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:

State and political subdivisions	State and political subdivisions	$	0	$	13,537	$	0	$	13,537	State and political subdivisions	$	—	$	13,537	$	—	$	13,537
Residential mortgage-backed securities	Residential mortgage-backed securities	0		114,163		0		114,163		Residential mortgage-backed securities	—		114,163		—		114,163
Collateralized mortgage obligations	Collateralized mortgage obligations	0		5,321		0		5,321		Collateralized mortgage obligations	—		5,321		—		5,321
Corporate bonds	Corporate bonds	0		76,019		9,600		85,619		Corporate bonds	—		76,019		9,600		85,619
Total available-for-sale securities	Total available-for-sale securities	0		209,040		9,600		218,640		Total available-for-sale securities	—		209,040		9,600		218,640
Equity securities:	Equity securities:									Equity securities:
Equity securities - financial services industry	Equity securities - financial services industry	818		0		0		818		Equity securities - financial services industry	818		—		—		818
Money market mutual funds	Money market mutual funds	2,461		0		0		2,461		Money market mutual funds	2,461		—		—		2,461
Total equity securities	Total equity securities	3,279		0		0		3,279		Total equity securities	3,279		—		—		3,279
Loans*	Loans*	0		0		187		187		Loans*	—		—		187		187
Loans held for sale	Loans held for sale	0		37,039		0		37,039		Loans held for sale	—		37,039		—		37,039
Interest rate locks with customers*	Interest rate locks with customers*	0		2,894		0		2,894		Interest rate locks with customers*	—		2,894		—		2,894

Total assets	Total assets	$	3,279	$	248,973	$	9,787	$	262,039	Total assets	$	3,279	$	248,973	$	9,787	$	262,039
Liabilities:	Liabilities:									Liabilities:
Contingent consideration liability	Contingent consideration liability	$	0	$	0	$	55	$	55	Contingent consideration liability	$	—	$	—	$	55	$	55
Interest rate swaps*	Interest rate swaps*	0		541		0		541		Interest rate swaps*	—		541		—		541
Credit derivatives*	Credit derivatives*	0		0		535		535		Credit derivatives*	—		—		535		535
Forward loan sale commitments*	Forward loan sale commitments*	0		752		0		752		Forward loan sale commitments*	—		752		—		752
Total liabilities	Total liabilities	$	0	$	1,293	$	590	$	1,883	Total liabilities	$	—	$	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 ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020:

Three Months Ended March 31, 2021
(Dollars in thousands) Balance at
December 31,
2020 Additions Payments received (Decrease) increase in value Balance at March 31, 2021
Corporate bonds $ 9,600 $ 0 $ 0 $ 0 $ 9,600
Loans 187 0 (33) (2) 152
Credit derivatives (535) (843) 0 1,107 (271)
Net total $ 9,252 $ (843) $ (33) $ 1,105 $ 9,481


	Nine Months Ended September 30, 2021
(Dollars in thousands)	Balance at December 31, 2020		Additions		Payments received		Increase (decrease) in value		Balance at September 30, 2021
Corporate bonds	$	9,600	$	—	$	—	$	25	$	9,625
Loans	187		—		(100)		(5)		82
Credit derivatives	(535)		(1,681)		—		1,866		(350)
Net total	$	9,252	$	(1,681)	$	(100)	$	1,886	$	9,357


		Three Months Ended March 31, 2020						Nine Months Ended September 30, 2020
(Dollars in thousands)	(Dollars in thousands)	Balance at December 31, 2019		Additions		Payments received			Increase in value		Balance at March 31, 2020		(Dollars in thousands)	Balance at December 31, 2019		Additions		Payments received		Increase (decrease) in value		Balance at September 30, 2020

Corporate bonds													Corporate bonds	$	—	$	—	$	—	$	—	$	—
Loans	Loans	$	317	$	0	$	(30)		$	1	$	288	Loans	317		—		(91)		(5)		221
Credit derivatives	Credit derivatives	(176)		(1,073)		0			140		(1,109)		Credit derivatives	(176)		(4,683)		—		4,143		(716)
Net total	Net total	$	141	$	(1,073)	$	(30)		$	141	$	(821)	Net total	$	141	$	(4,683)	$	(91)	$	4,138	$	(495)

3441

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 ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020:


		Three Months Ended March 31, 2021											Nine Months Ended September 30, 2021
(Dollars in thousands)	(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		(Dollars in thousands)	Balance at December 31, 2020		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at September 30, 2021
Girard Partners	Girard Partners	$	55	$	0	$	29	$	2	$	28	Girard Partners	$	55	$	—	$	58	$	3	$	—
Total contingent consideration liability	Total contingent consideration liability	$	55	$	0	$	29	$	2	$	28	Total contingent consideration liability	$	55	$	—	$	58	$	3	$	—


		Three Months Ended March 31, 2020											Nine Months Ended September 30, 2020
(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 March 31, 2020		(Dollars in thousands)	Balance at December 31, 2019		Contingent Consideration from New Acquisition		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at September 30, 2020
Girard Partners	Girard Partners	$	160	$	0	$	31	$	6	$	135	Girard Partners	$	160	$	—	$	91	$	14	$	83
Total contingent consideration liability	Total contingent consideration liability	$	160	$	0	$	31	$	6	$	135	Total contingent consideration liability	$	160	$	—	$	91	$	14	$	83

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 ~~March 31,~~September 30, 2021 and December 31, 2020:


		At March 31, 2021									At September 30, 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	$	0	$	0	$	29,564	$	29,564	Individually analyzed loans held for investment	$	—	$	—	$	34,483	$	34,483

Other real estate owned	Other real estate owned	0		0		7,481		7,481		Other real estate owned	—		—		279		279
Total	Total	$	0	$	0	$	37,045	$	37,045	Total	$	—	$	—	$	34,762	$	34,762


		At December 31, 2020									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
Individually analyzed loans held for investment	Individually analyzed loans held for investment	$	0	$	0	$	30,900	$	30,900	Individually analyzed loans held for investment	$	—	$	—	$	30,900	$	30,900

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

3542

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 ~~March 31,~~September 30, 2021 and December 31, 2020. The disclosed fair values are classified using the fair value hierarchy.


		At March 31, 2021											At September 30, 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	$	187,317	$	0	$	0	$	187,317	$	187,317	Cash and short-term interest-earning assets	$	902,357	$	—	$	—	$	902,357	$	902,357

Held-to-maturity securities	Held-to-maturity securities	0		139,298		0		139,298		135,153		Held-to-maturity securities	—		115,661		—		115,661		112,643
Federal Home Loan Bank, Federal Reserve Bank and other stock	Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		25,571		Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		28,679
Net loans and leases held for investment	Net loans and leases held for investment	0		0		5,381,681		5,381,681		5,313,793		Net loans and leases held for investment	—		—		5,223,709		5,223,709		5,147,334
Servicing rights	Servicing rights	0		0		9,655		9,655		7,015		Servicing rights	—		—		10,336		10,336		7,610
Total assets	Total assets	$	187,317	$	139,298	$	5,391,336	$	5,717,951	$	5,668,849	Total assets	$	902,357	$	115,661	$	5,234,045	$	6,252,063	$	6,198,623
Liabilities:	Liabilities:											Liabilities:
Deposits:	Deposits:											Deposits:
Demand and savings deposits, non-maturity	Demand and savings deposits, non-maturity	$	4,837,381	$	0	$	0	$	4,837,381	$	4,837,381	Demand and savings deposits, non-maturity	$	5,444,114	$	—	$	—	$	5,444,114	$	5,444,114
Time deposits	Time deposits	0		482,098		0		482,098		474,211		Time deposits	—		500,192		—		500,192		494,040
Total deposits	Total deposits	4,837,381		482,098		0		5,319,479		5,311,592		Total deposits	5,444,114		500,192		—		5,944,306		5,938,154
Short-term borrowings	Short-term borrowings	0		26,676		0		26,676		26,676		Short-term borrowings	—		14,101		—		14,101		14,101
Long-term debt	Long-term debt	0		97,193		0		97,193		95,000		Long-term debt	—		96,762		—		96,762		95,000
Subordinated notes	Subordinated notes	0		181,000		0		181,000		173,617		Subordinated notes	—		105,500		—		105,500		98,797
Total liabilities	Total liabilities	$	4,837,381	$	786,967	$	0	$	5,624,348	$	5,606,885	Total liabilities	$	5,444,114	$	716,555	$	—	$	6,160,669	$	6,146,052


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

3643

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.

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 ~~March 31,~~September 30, 2021, individually analyzed loans held for investment had a carrying amount of ~~$29.8~~$34.5 million with a valuation allowance of ~~$281~~$15 thousand. At December 31, 2020, individually analyzed loans held for investment had a carrying amount of $31.5 million with a valuation allowance of $585 thousand. The Corporation had 0no individually analyzed leases at ~~March 31,~~September 30, 2021 or December 31, 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 ~~March 31,~~September 30, 2021, servicing rights had a net carrying amount of ~~$7.0~~$7.6 million, which included a valuation allowance of $1$18 thousand. At December 31, 2020, servicing rights had a net carrying amount of $6.5 million, which included a valuation allowance of $87 thousand.

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 ~~three~~nine months ended ~~March 31,~~September 30, 2021, there were no required valuation adjustments of goodwill and other identifiable intangible assets.

Other real estate owned: Other real estate owned (OREO) represents properties that the 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, adjusted periodically based on a current appraisal or an executed agreement of sale. Capital improvement expenses associated with the construction or repair of the property are capitalized as part of the cost of the OREO asset. Write-downs and any gain or loss upon the sale of OREO is recorded in other noninterest income. OREO is reported in other assets on the condensed consolidated balance sheet. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, three commercial real estate properties were transferred to OREO with a carrying balance of $126 thousand. At ~~March 31,~~September 30, 2021 and December 31, 2020, OREO had a carrying amount of ~~$7.5 million~~$279 thousand and $7.4 million, respectively. During the nine months ended September 30, 2021, a commercial real estate property with a carrying value of $7.1 million was sold. Other real estate owned is classified within Level 3 of the valuation hierarchy due to the unique characteristics of the collateral for each loan.

3744

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.

Note 13. Segment Reporting

At ~~March 31,~~September 30, 2021, the Corporation ~~has~~had 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 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 investment advisory, financial planning, trust and brokerage services. The Wealth Management segment serves a diverse client base of private families and individuals, municipal pension plans, retirement plans, trusts and guardianships.
●			The Insurance segment includes a full-service insurance brokerage agency offering commercial property and casualty insurance, 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 March 31, 2021		At December 31, 2020		At March 31, 2020		(Dollars in thousands)	At September 30, 2021		At December 31, 2020		At September 30, 2020
Banking	Banking	$	6,313,000	$	6,234,336	$	5,362,279	Banking	$	6,868,525	$	6,234,336	$	6,277,894
Wealth Management	Wealth Management	48,124		48,646		45,786		Wealth Management	51,280		48,646		47,550
Insurance	Insurance	37,075		35,906		35,935		Insurance	38,118		35,906		35,168
Other	Other	18,466		17,608		20,768		Other	21,929		17,608		22,219
Consolidated assets	Consolidated assets	$	6,416,665	$	6,336,496	$	5,464,768	Consolidated assets	$	6,979,852	$	6,336,496	$	6,382,831

3845

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


		Three Months Ended											Three Months Ended
		March 31, 2021											September 30, 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	$	51,449	$	0	$	0	$	8	$	51,457	Interest income	$	53,562	$	—	$	—	$	9	$	53,571
Interest expense	Interest expense	3,750		0		0		2,293		6,043		Interest expense	3,556		—		—		1,328		4,884
Net interest income (expense)	Net interest income (expense)	47,699		0		0		(2,285)		45,414		Net interest income (expense)	50,006		—		—		(1,319)		48,687
Reversal of provision for credit losses	Reversal of provision for credit losses	(11,283)		0		0		0		(11,283)		Reversal of provision for credit losses	(182)		—		—		—		(182)
Noninterest income	Noninterest income	11,230		6,773		5,105		142		23,250		Noninterest income	9,548		6,963		3,988		53		20,552
Noninterest expense	Noninterest expense	30,496		4,191		3,304		1,549		39,540		Noninterest expense	34,378		4,922		3,232		716		43,248
Intersegment (revenue) expense*	Intersegment (revenue) expense*	(323)		164		159		0		0		Intersegment (revenue) expense*	(323)		164		159		—		—
Income (expense) before income taxes	Income (expense) before income taxes	40,039		2,418		1,641		(3,692)		40,407		Income (expense) before income taxes	25,681		1,877		597		(1,982)		26,173
Income tax expense (benefit)	Income tax expense (benefit)	8,271		498		351		(1,316)		7,804		Income tax expense (benefit)	5,196		391		123		(448)		5,262
Net income (loss)	Net income (loss)	$	31,768	$	1,920	$	1,290	$	(2,376)	$	32,603	Net income (loss)	$	20,485	$	1,486	$	474	$	(1,534)	$	20,911

Net capital expenditures	Net capital expenditures	$	1,111	$	5	$	9	$	62	$	1,187	Net capital expenditures	$	431	$	4	$	5	$	15	$	455


		Three Months Ended											Three Months Ended
		March 31, 2020											September 30, 2020
(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	$	52,004	$	7	$	0	$	8	$	52,019	Interest income	$	50,603	$	1	$	—	$	8	$	50,612
Interest expense	Interest expense	8,276		0		0		1,275		9,551		Interest expense	4,867		—		—		1,891		6,758
Net interest income (expense)		43,728		7		0		(1,267)		42,468
Net interest income												Net interest income	45,736		1		—		(1,883)		43,854
Provision for credit losses	Provision for credit losses	21,843		0		0		0		21,843		Provision for credit losses	3,935		—		—		—		3,935
Noninterest income	Noninterest income	7,552		6,187		4,887		(242)		18,384		Noninterest income	11,919		5,963		3,924		(1)		21,805

Other noninterest expense		31,247		4,178		3,196		156		38,777
Noninterest Expense												Noninterest Expense	31,304		3,845		2,974		404		38,527
Intersegment (revenue) expense*	Intersegment (revenue) expense*	(282)		152		130		0		0		Intersegment (revenue) expense*	(296)		168		128		—		—
(Loss) income before income taxes		(1,528)		1,864		1,561		(1,665)		232
Income (loss) before income taxes												Income (loss) before income taxes	22,712		1,951		822		(2,288)		23,197
Income tax (benefit) expense	Income tax (benefit) expense	(844)		382		336		(480)		(606)		Income tax (benefit) expense	4,367		396		171		144		5,078
Net (loss) income		$	(684)	$	1,482	$	1,225	$	(1,185)	$	838
Net income (loss)												Net income (loss)	$	18,345	$	1,555	$	651	$	(2,432)	$	18,119

Net capital expenditures	Net capital expenditures	$	371	$	5	$	3	$	0	$	379	Net capital expenditures	$	646	$	15	$	14	$	8	$	683


	Nine Months Ended
	September 30, 2021
(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	157,443	$	1	$	—	$	25	$	157,469
Interest expense	10,789		—		—		5,822		16,611
Net interest income (expense)	146,654		1		—		(5,797)		140,858
Reversal of provision for credit losses	(11,524)		—		—		—		(11,524)
Noninterest income	30,211		20,492		13,083		246		64,032
Noninterest expense	97,977		13,499		9,686		2,912		124,074
Intersegment (revenue) expense*	(969)		492		477		—		—
Income (expense) before income taxes	91,381		6,502		2,920		(8,463)		92,340
Income tax expense (benefit)	18,373		1,347		613		(2,382)		17,951
Net income (loss)	$	73,008	$	5,155	$	2,307	$	(6,081)	$	74,389

Net capital expenditures	$	3,121	$	16	$	18	$	86	$	3,241


	Nine Months Ended
	September 30, 2020
(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	152,578	$	8	$	—	$	25	$	152,611
Interest expense	18,399		—		—		4,372		22,771
Net interest income	134,179		8		—		(4,347)		129,840
Provision for credit losses	49,515		—		—		—		49,515
Noninterest income	27,755		17,654		13,020		(240)		58,189
Noninterest expense	91,097		11,752		9,095		1,320		113,264
Intersegment (revenue) expense*	(852)		466		386		—		—
(Loss) income before income taxes	22,174		5,444		3,539		(5,907)		25,250
Income tax (benefit) expense	2,944		1,109		749		(594)		4,208
Net income (loss)	$	19,230	$	4,335	$	2,790	$	(5,313)	$	21,042

Net capital expenditures	$	2,291	$	21	$	23	$	28	$	2,363

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

Note 14. 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.

3947

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

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

Forward-Looking Statements

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

•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;

•Economic assumptions utilized to calculate 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;

•Competition for loans, deposits and ~~deposits;~~employees;

•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~~Given 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 of the COVID-19 pandemic, it is difficult to predict the full impact of the

COVID-19 ~~outbreak~~pandemic 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.~~abated and whether the continued reopening of businesses will result in a meaningful increase in economic activity. As a result of the COVID-19 pandemic and the related 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, making it difficult to grow assets and income;~~decline;

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

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

•Our allowance for credit losses ~~on loans and leases~~ may ~~increase~~have to be increased if economic conditions worsen or if borrowers experience financial ~~difficulties, which will adversely affect our net income;~~difficulties;

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

•A sustained decline in our stock price or the occurrence of what management would deem to be a triggering event that could result in a goodwill or intangible impairment charge being recorded 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 athe 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~~experiences additional resolution costs; and

•~~We face litigation,~~Litigation, regulatory enforcement risk and reputation risk ~~as a result of~~regarding our participation in the ~~PPP~~Paycheck Protection Program 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, 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 has identified the fair value measurement of investment securities available-for-sale and the calculation of the allowance for credit losses on loans and leases as critical accounting policies. For more information on these critical accounting policies, please refer to the Corporation’s 2020 Annual Report on Form 10-K.

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 its subsidiaries.

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 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
March 31, Change
(Dollars in thousands, except per share data) 2021 2020 Amount Percent
Net income $ 32,603 $ 838 $ 31,765 NM
Net income per share:
Basic $ 1.11 $ 0.03 $ 1.08 NM
Diluted 1.11 0.03 1.08 NM
Return on average assets 2.07 % 0.06 % 201 BP NM
Return on average equity 18.90 % 0.50 % 1,840 BP NM


	Three Months Ended										Nine Months Ended
	September 30,						Change				September 30,						Change
(Dollars in thousands, except per share data)	2021			2020			Amount		Percent		2021			2020			Amount		Percent
Net income	$	20,911		$	18,119		$	2,792	15.4	%	$	74,389		$	21,042		$	53,347	253.5	%
Net income per share:
Basic	$	0.71		$	0.62		$	0.09	14.5		$	2.53		$	0.72		$	1.81	251.4
Diluted	0.71			0.62			0.09		14.5		2.52			0.72			1.80		250.0
Return on average assets	1.24		%	1.15		%	9 BP		7.8		1.53		%	0.48		%	105 BP		218.8
Return on average equity	11.12		%	10.89		%	23 BP		2.1		13.72		%	4.22		%	950 BP		225.5

The Corporation reported net income of ~~$32.6~~$20.9 million, or ~~$1.11~~$0.71 diluted earnings per share, for the three months ended ~~March 31,~~September 30, 2021, compared to net income of ~~$838 thousand,~~$18.1 million, or ~~$0.03~~$0.62 diluted earnings per share, for the three months ended ~~March 31,~~September 30, 2020. Net income for the nine months ended September 30, 2021 was $74.4 million, or $2.52 diluted earnings per share, compared to net income of $21.0 million, or $0.72 diluted earnings per share, for the nine months ended September 30, 2020.

As of September 30, 2021, $85.6 million in PPP loan originations remained outstanding. During the ~~three months ended March 31,~~third quarter of 2021, the Corporation recorded a reversal of provision for credit losses of $11.3 million, of which $12.9 million (after-tax benefit of $10.2 million), or $0.35 diluted earnings per share, 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 March 31, 2020 was $21.8 million of which $20.3 million (after-tax charge of $16.1 million), or $0.55 diluted earnings per share, was attributable to adverse changes in economic-related assumptions.

On December 27, 2020, the Consolidated Appropriations Act, 2021, was signed into law, 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 quarter, we recorded income of ~~$4.5~~$4.2 million within net interest income related to these loans, of which ~~$2.3~~$3.7 million was the result of recognition of associated net deferred loan fees upon forgiveness and pay downs of PPP loans totaling ~~$119.7~~$171.4 million. During the nine months ended September 30, 2021, we recorded income of $13.5 million within net interest income related to these loans, of which $8.6 million was the result of recognition of associated net deferred loan fees upon forgiveness and pay downs of PPP loans totaling $575.3 million. As of ~~March 31,~~September 30, 2021, the Corporation had ~~$9.5~~$2.4 million of net deferred fees on ~~our~~the balance sheet related to PPP ~~loans.~~loans, which represented approximately 13.2% of the initial deferred fee amount.

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, tax-equivalent yields earned on average assets, cost of average liabilities, and shareholders’ equity on a tax-equivalent basis for the three and nine months ended ~~March 31,~~September 30, 2021 and 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 nine months ended ~~March 31,~~September 30, 2021 versus 2020

Net interest income on a tax-equivalent basis for the three months ended ~~March 31,~~September 30, 2021 was ~~$46.0~~$49.2 million, an increase of ~~$2.8~~$4.8 million, or ~~6.6%~~10.7%, compared to $44.5 million for the three months ended September 30, 2020. Net interest income on a tax-equivalent basis for the nine months ended September 30, 2021 was $142.5 million, an increase of $10.7 million, or 8.1%, compared to the ~~three months ended March 31,~~same period in 2020. The increase in tax-equivalent net interest income for the three months ended ~~March 31,~~September 30, 2021 compared to ~~same~~the comparable period in the prior year was primarily due to ~~$4.5 million~~an increase in PPP loan income of $1.4 million, a ~~$3.5~~$1.9 million decrease in the cost of interest-bearing liabilities and growth in loans partially offset by a

decrease in loan, excluding PPP, and investment yields. The increase in tax-equivalent net interest income for the nine months ended September 30, 2021 compared to the comparable period in the prior year was primarily due to an increase in PPP loan income of $8.5 million, a $6.2 million decrease in the cost of interest-bearing liabilities and growth in loans partially offset by a decrease in ~~loan~~loans and investment yields.

The net interest margin, on a tax-equivalent basis, was ~~3.12%~~3.11% and 3.13% for the three and nine months ended ~~March 31,~~September 30, 2021, respectively, compared to ~~3.48%~~3.02% and 3.21% for the three and nine months ended ~~March 31, 2020.~~September 30, 2020, respectively. Excess liquidity reduced the net interest margin by approximately ~~eleven~~27 and 16 basis points for the three and nine months ended ~~March 31,~~September 30, 2021, respectively, compared to ~~six~~18 and 14 basis points for the three and nine months ended ~~March 31, 2020.~~September 30, 2020, respectively. This excess liquidity was primarily driven by strong growth of deposit ~~balance growth over~~balances since the ~~last twelve months, which was partially attributable~~beginning of the COVID-19 pandemic, primarily due to the various pandemic-related stimulus ~~initiatives associated with the COVID-19 pandemic.~~initiatives. PPP loans had a favorable impact on net interest margin of ~~four~~20 and 12 basis points for the three and nine months ended ~~March 31,~~September 30, 2021, respectively, compared to noan unfavorable impact of ten and seven basis points for the three and nine months ended ~~March 31,~~September 30, 2020, respectively. As PPP loans are forgiven, the associated deferred fees are recognized in earnings, which occurred with greater frequency in 2021 as compared to 2020. Excluding the impact of excess liquidity and PPP loans, the net interest margin, on a tax-equivalent basis, was ~~3.19%~~3.18% and ~~3.54%~~3.17% for the three and nine months ended ~~March 31,~~September 30, 2021, respectively, compared to 3.30% and ~~March 31,~~3.42% for the three and nine months ended September 30, 2020, respectively.

4351

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

Three Months Ended March 31,
2021 2020
(Dollars in thousands) Average
Balance Income/
Expense Average
Rate Average
Balance Income/
Expense Average
Rate
Assets:
Interest-earning deposits with other banks $ 237,548 $ 56 0.10 % $ 118,108 $ 325 1.11 %
U.S. government obligations 6,998 36 2.09 7,298 37 2.04
Obligations of states and political subdivisions 11,544 105 3.69 33,595 289 3.46
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 26,368 348 5.35 31,450 527 6.74
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 782,208 6,798 3.52 821,267 8,631 4.23
Paycheck Protection Program loans 506,939 4,524 3.62 — — —
Real estate—commercial and construction loans 2,621,981 24,458 3.78 2,139,369 23,917 4.50
Real estate—residential loans 1,037,000 9,873 3.86 991,550 11,052 4.48
Loans to individuals 26,447 265 4.06 30,016 407 5.45
Municipal loans and leases 245,638 2,530 4.18 317,006 3,265 4.14
Lease financings 105,684 1,737 6.67 89,376 1,554 6.99
Gross loans and leases 5,325,897 50,185 3.82 4,388,584 48,826 4.47
Total interest-earning assets 5,964,182 51,997 3.54 4,980,042 52,672 4.25
Cash and due from banks 55,311 50,891
Allowance for credit losses, loans and leases (83,254) (44,372)
Premises and equipment, net 55,826 56,399
Operating lease right-of-use assets 34,033 34,545
Other assets 357,365 332,056
Total assets $ 6,383,463 $ 5,409,561
Liabilities:
Interest-bearing checking deposits $ 817,940 $ 490 0.24 $ 584,391 $ 796 0.55
Money market savings 1,243,673 853 0.28 1,057,336 2,903 1.10
Regular savings 959,232 298 0.13 816,760 792 0.39
Time deposits 525,800 1,759 1.36 602,903 2,915 1.94
Total time and interest-bearing deposits 3,546,645 3,400 0.39 3,061,390 7,406 0.97
Short-term borrowings 17,894 2 0.05 40,126 106 1.06
Long-term debt 101,333 348 1.39 169,205 764 1.82
Subordinated notes 183,340 2,293 5.07 94,847 1,275 5.41
Total borrowings 302,567 2,643 3.54 304,178 2,145 2.84
Total interest-bearing liabilities 3,849,212 6,043 0.64 3,365,568 9,551 1.14
Noninterest-bearing deposits 1,749,502 1,288,594
Operating lease liabilities 37,415 37,766
Accrued expenses and other liabilities 47,598 44,173
Total liabilities 5,683,727 4,736,101
Shareholders’ Equity:
Common stock 157,784 157,784
Additional paid-in capital 296,136 295,318
Retained earnings and other equity 245,816 220,358
Total shareholders’ equity 699,736 673,460
Total liabilities and shareholders’ equity $ 6,383,463 $ 5,409,561
Net interest income $ 45,954 $ 43,121
Net interest spread 2.90 3.11
Effect of net interest-free funding sources 0.22 0.37
Net interest margin 3.12 % 3.48 %
Ratio of average interest-earning assets to average interest-bearing liabilities 154.95 % 147.97 %


	Three Months Ended September 30,
	2021							2020
(Dollars in thousands)	Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate
Assets:
Interest-earning deposits with other banks	$	530,191		$	189	0.14	%	$	368,181		$	100	0.11	%
U.S. government obligations	6,999			36		2.04		6,998			36		2.05
Obligations of states and political subdivisions	2,992			24		3.18		18,004			167		3.69
Other debt and equity securities	385,289			1,516		1.56		360,219			1,610		1.78
Federal Home Loan Bank, Federal Reserve Bank and other stock	26,713			334		4.96		28,651			419		5.82
Total interest-earning deposits, investments and other interest-earning assets	952,184			2,099		0.87		782,053			2,332		1.19
Commercial, financial and agricultural loans	880,986			7,412		3.34		807,376			7,330		3.61
Paycheck Protection Program loans	162,611			4,162		10.15		500,549			2,811		2.23
Real estate—commercial and construction loans	2,784,398			25,634		3.65		2,358,971			23,547		3.97
Real estate—residential loans	1,100,799			10,171		3.67		1,009,407			10,380		4.09
Loans to individuals	26,048			253		3.85		28,663			309		4.29
Municipal loans and leases	247,603			2,504		4.01		267,364			2,839		4.22
Lease financings	117,966			1,856		6.24		97,707			1,662		6.77
Gross loans and leases	5,320,411			51,992		3.88		5,070,037			48,878		3.84
Total interest-earning assets	6,272,595			54,091		3.42		5,852,090			51,210		3.48
Cash and due from banks	59,642							56,715
Allowance for credit losses, loans and leases	(72,606)							(87,046)
Premises and equipment, net	55,685							55,755
Operating lease right-of-use assets	31,998							33,875
Other assets	350,863							354,216
Total assets	$	6,698,177						$	6,265,605
Liabilities:
Interest-bearing checking deposits	$	857,098		$	537	0.25		$	725,580		$	468	0.26
Money market savings	1,382,832			922		0.26		1,116,628			897		0.32
Regular savings	998,568			281		0.11		901,716			449		0.20
Time deposits	496,702			1,490		1.19		525,656			2,214		1.68
Total time and interest-bearing deposits	3,735,200			3,230		0.34		3,269,580			4,028		0.49
Short-term borrowings	15,116			2		0.05		130,359			97		0.30
Long-term debt	95,000			324		1.35		208,776			742		1.41
Subordinated notes	98,754			1,328		5.34		155,945			1,891		4.82
Total borrowings	208,870			1,654		3.14		495,080			2,730		2.19
Total interest-bearing liabilities	3,944,070			4,884		0.49		3,764,660			6,758		0.71
Noninterest-bearing deposits	1,931,525							1,760,818
Operating lease liabilities	35,094							37,170
Accrued expenses and other liabilities	41,303							41,010
Total liabilities	5,951,992							5,603,658
Shareholders’ Equity:
Common stock	157,784							157,784
Additional paid-in capital	297,482							296,272
Retained earnings and other equity	290,919							207,891
Total shareholders’ equity	746,185							661,947
Total liabilities and shareholders’ equity	$	6,698,177						$	6,265,605
Net interest income				$	49,207						$	44,452
Net interest spread						2.93							2.77
Effect of net interest-free funding sources						0.18							0.25
Net interest margin						3.11	%						3.02	%
Ratio of average interest-earning assets to average interest-bearing liabilities	159.04		%					155.45		%

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 ~~March 31,~~September 30, 2021 and 2020 have been calculated using the Corporation's federal applicable rate of 21%.

4452


	Nine Months Ended September 30,
	2021							2020
(Dollars in thousands)	Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate
Assets:
Interest-earning deposits with other banks	$	328,768		$	291	0.12	%	$	267,023		$	492	0.25	%
U.S. government obligations	6,999			107		2.04		7,176			109		2.03
Obligations of states and political subdivisions	6,838			187		3.66		26,019			696		3.57
Other debt and equity securities	371,355			4,147		1.49		379,729			6,460		2.27
Federal Home Loan Bank, Federal Reserve Bank and other stock	26,319			1,042		5.29		29,689			1,308		5.88
Total interest-earning deposits, investments and other interest-earning assets	740,279			5,774		1.04		709,636			9,065		1.71
Commercial, financial and agricultural loans	830,248			21,120		3.40		815,178			23,291		3.82
Paycheck Protection Program loans	358,231			13,464		5.03		291,173			4,939		2.27
Real estate—commercial and construction loans	2,703,100			75,023		3.71		2,244,143			70,574		4.20
Real estate—residential loans	1,067,855			29,880		3.74		1,001,904			31,702		4.23
Loans to individuals	25,925			769		3.97		29,251			1,043		4.76
Municipal loans and leases	248,191			7,632		4.11		291,845			9,081		4.16
Lease financings	111,569			5,412		6.49		92,780			4,808		6.92
Gross loans and leases	5,345,119			153,300		3.83		4,766,274			145,438		4.08
Total interest-earning assets	6,085,398			159,074		3.49		5,475,910			154,503		3.77
Cash and due from banks	55,983							51,544
Allowance for credit losses, loans and leases	(76,265)							(66,977)
Premises and equipment, net	55,803							55,967
Operating lease right-of-use assets	33,334							34,278
Other assets	355,323							342,196
Total assets	$	6,509,576						$	5,892,918
Liabilities:
Interest-bearing checking deposits	$	820,800		$	1,514	0.25		$	642,935		$	1,636	0.34
Money market savings	1,282,470			2,606		0.27		1,079,279			4,653		0.58
Regular savings	979,013			861		0.12		863,772			1,716		0.27
Time deposits	502,414			4,808		1.28		568,517			7,801		1.83
Total time and interest-bearing deposits	3,584,697			9,789		0.37		3,154,503			15,806		0.67
Short-term borrowings	17,363			7		0.05		110,689			325		0.39
Long-term debt	97,088			993		1.37		196,053			2,268		1.55
Subordinated notes	151,060			5,822		5.15		115,376			4,372		5.06
Total borrowings	265,511			6,822		3.44		422,118			6,965		2.20
Total interest-bearing liabilities	3,850,208			16,611		0.58		3,576,621			22,771		0.85
Noninterest-bearing deposits	1,854,648							1,571,629
Operating lease liabilities	36,636							37,538
Accrued expenses and other liabilities	43,023							41,691
Total liabilities	5,784,515							5,227,479
Shareholders’ Equity:
Common stock	157,784							157,784
Additional paid-in capital	296,744							295,759
Retained earnings and other equity	270,533							211,896
Total shareholders’ equity	725,061							665,439
Total liabilities and shareholders’ equity	$	6,509,576						$	5,892,918
Net interest income				$	142,463						$	131,732
Net interest spread						2.91							2.92
Effect of net interest-free funding sources						0.22							0.29
Net interest margin						3.13	%						3.21	%
Ratio of average interest-earning assets to average interest-bearing liabilities	158.05		%					153.10		%

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 nine months ended September 30, 2021 and 2020 have been calculated using the Corporation's federal applicable rate of 21%.

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						Three Months Ended				Nine Months Ended
		March 31, 2021 Versus 2020						September 30, 2021 Versus 2020				September 30, 2021 Versus 2020
(Dollars in thousands)	(Dollars in thousands)	Volume Change		Rate Change		Total			(Dollars in thousands)	Volume Change		Rate Change		Total		Volume Change		Rate Change		Total
Interest income:	Interest income:								Interest income:
Interest-earning deposits with other banks	Interest-earning deposits with other banks	$	170	$	(439)	$	(269)		Interest-earning deposits with other banks	$	55	$	34	$	89	$	98	$	(299)	$	(201)
U.S. government obligations	U.S. government obligations	(2)		1		(1)			U.S. government obligations	—		—		—		(3)		1		(2)
Obligations of states and political subdivisions	Obligations of states and political subdivisions	(202)		18		(184)			Obligations of states and political subdivisions	(123)		(20)		(143)		(526)		17		(509)
Other debt and equity securities	Other debt and equity securities	(273)		(1,128)		(1,401)			Other debt and equity securities	109		(203)		(94)		(139)		(2,174)		(2,313)
Federal Home Loan Bank, Federal Reserve Bank and other stock	Federal Home Loan Bank, Federal Reserve Bank and other stock	(78)		(101)		(179)			Federal Home Loan Bank, Federal Reserve Bank and other stock	(26)		(59)		(85)		(141)		(125)		(266)
Interest on deposits, investments and other earning assets	Interest on deposits, investments and other earning assets	(385)		(1,649)		(2,034)			Interest on deposits, investments and other earning assets	15		(248)		(233)		(711)		(2,580)		(3,291)
Commercial, financial and agricultural loans	Commercial, financial and agricultural loans	(402)		(1,431)		(1,833)			Commercial, financial and agricultural loans	648		(566)		82		425		(2,596)		(2,171)
Paycheck Protection Program loans	Paycheck Protection Program loans	4,524		—		4,524			Paycheck Protection Program loans	(2,974)		4,325		1,351		1,357		7,168		8,525
Real estate—commercial and construction loans	Real estate—commercial and construction loans	4,781		(4,240)		541			Real estate—commercial and construction loans	4,068		(1,981)		2,087		13,312		(8,863)		4,449
Real estate—residential loans	Real estate—residential loans	464		(1,643)		(1,179)			Real estate—residential loans	902		(1,111)		(209)		2,002		(3,824)		(1,822)
Loans to individuals	Loans to individuals	(45)		(97)		(142)			Loans to individuals	(26)		(30)		(56)		(111)		(163)		(274)
Municipal loans and leases	Municipal loans and leases	(765)		30		(735)			Municipal loans and leases	(200)		(135)		(335)		(1,341)		(108)		(1,449)
Lease financings	Lease financings	259		(76)		183			Lease financings	330		(136)		194		919		(315)		604
Interest and fees on loans and leases	Interest and fees on loans and leases	8,816		(7,457)		1,359			Interest and fees on loans and leases	2,748		366		3,114		16,563		(8,701)		7,862
Total interest income	Total interest income	8,431		(9,106)		(675)			Total interest income	2,763		118		2,881		15,852		(11,281)		4,571
Interest expense:	Interest expense:								Interest expense:
Interest-bearing checking deposits	Interest-bearing checking deposits	245		(551)		(306)			Interest-bearing checking deposits	87		(18)		69		380		(502)		(122)
Money market savings	Money market savings	429		(2,479)		(2,050)			Money market savings	203		(178)		25		771		(2,818)		(2,047)
Regular savings	Regular savings	116		(610)		(494)			Regular savings	46		(214)		(168)		210		(1,065)		(855)
Time deposits	Time deposits	(345)		(811)		(1,156)			Time deposits	(116)		(608)		(724)		(834)		(2,159)		(2,993)
Interest on time and interest-bearing deposits		445		(4,451)		(4,006)
Total time and interest-bearing deposits									Total time and interest-bearing deposits	220		(1,018)		(798)		527		(6,544)		(6,017)
Short-term borrowings	Short-term borrowings	(38)		(66)		(104)			Short-term borrowings	(49)		(46)		(95)		(156)		(162)		(318)
Long-term debt	Long-term debt	(261)		(155)		(416)			Long-term debt	(388)		(30)		(418)		(1,036)		(239)		(1,275)
Subordinated notes	Subordinated notes	1,103		(85)		1,018			Subordinated notes	(751)		188		(563)		1,371		79		1,450
Interest on borrowings	Interest on borrowings	804		(306)		498			Interest on borrowings	(1,188)		112		(1,076)		179		(322)		(143)
Total interest expense	Total interest expense	1,249		(4,757)		(3,508)			Total interest expense	(968)		(906)		(1,874)		706		(6,866)		(6,160)
Net interest income	Net interest income	$	7,182	$	(4,349)	$	2,833		Net interest income	$	3,731	$	1,024	$	4,755	$	15,146	$	(4,415)	$	10,731

4554

Provision for Credit Losses

The reversal of the provision for credit losses for the three months ended ~~March 31,~~September 30, 2021 was ~~$11.3 million,~~$182 thousand, of which ~~$12.9~~$2.9 million (after-tax benefit of ~~$10.2~~$2.3 million) was attributable to favorable changes in economic-related assumptions within the Corporation's CECL model, partially offset by ~~a reserve~~an increase ~~attributable to~~in reserves for loan, ~~growth.~~unfunded commitments and investment securities. The provision for credit losses for the three months ended ~~March 31,~~September 30, 2020 was ~~$21.8~~$3.9 million, of which ~~$20.3~~$5.6 million was related to loans and leases, $163 thousand was a reversal of provision related to investment securities and $1.5 million was a reversal of provision related to unfunded commitments. Included within the $3.9 million in provision for credit losses was $280 thousand (after-tax charge of $221 thousand), which was attributable to ~~adverse~~ changes in economic-related ~~assumptions. Net loan and lease charge-offs~~assumptions within the Corporation's CECL model, which were predominately driven by COVID-19.

The reversal of the provision for credit losses for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 ~~were $288 thousand compared~~was $11.5 million, of which $18.7 million (after-tax benefit of $14.8 million) was attributable to ~~$489 thousand~~favorable changes in economic-related assumptions within the Corporation's CECL model, partially offset by an increase in reserves for loans, unfunded commitments and investment securities. The provision for credit losses for the ~~same period in~~nine months ended September 30, 2020 was $49.5 million, of which $40.5 million (after-tax charge of $32.0 million) was attributable to economic-related assumptions within the ~~prior year.~~Corporation's CECL model.

Noninterest Income

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


		Three Months Ended									Three Months Ended								Nine Months Ended
		March 31,				Change				September 30,			Change				September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2021		2020		Amount		Percent				(Dollars in thousands)	2021		2020		Amount		Percent		2021		2020		Amount		Percent
Trust fee income	Trust fee income	$	2,034	$	1,890	$	144	7.6	%			Trust fee income	2,126		$	1,915	$	211	11.0	%	$	6,317	$	5,729	$	588	10.3	%
Service charges on deposit accounts	Service charges on deposit accounts	1,282		1,397		(115)		(8.2)				Service charges on deposit accounts	1,422		1,187		235		19.8		4,018		3,474		544		15.7
Investment advisory commission and fee income	Investment advisory commission and fee income	4,697		4,255		442		10.4				Investment advisory commission and fee income	4,796		4,005		791		19.8		14,051		11,800		2,251		19.1
Insurance commission and fee income	Insurance commission and fee income	4,955		4,732		223		4.7				Insurance commission and fee income	3,837		3,776		61		1.6		12,631		12,575		56		0.4
Other service fee income	Other service fee income	2,192		1,870		322		17.2				Other service fee income	2,576		2,093		483		23.1		7,516		5,451		2,065		37.9
Bank owned life insurance income	Bank owned life insurance income	717		734		(17)		(2.3)				Bank owned life insurance income	925		741		184		24.8		3,262		2,207		1,055		47.8
Net gain on sales of investment securities	Net gain on sales of investment securities	65		695		(630)		(90.6)				Net gain on sales of investment securities	21		57		(36)		(63.2)		140		817		(677)		(82.9)
Net gain on mortgage banking activities	Net gain on mortgage banking activities	5,938		2,744		3,194		116.4				Net gain on mortgage banking activities	3,224		5,860		(2,636)		(45.0)		12,623		12,119		504		4.2

Other income	Other income	1,370		67		1,303		NM				Other income	1,625		2,171		(546)		(25.1)		3,474		4,017		(543)		(13.5)
Total noninterest income	Total noninterest income	$	23,250	$	18,384	$	4,866	26.5	%			Total noninterest income	$	20,552	$	21,805	$	(1,253)	(5.7	%)	$	64,032	$	58,189	$	5,843	10.0	%

Three and nine months ended ~~March 31,~~September 30, 2021 versus 2020

Noninterest income for the three months ended ~~March 31,~~September 30, 2021 was ~~$23.3~~$20.6 million, ~~an increase~~a decrease of ~~$4.9~~$1.3 million, or ~~26.5%~~5.7%, from the three months ended ~~March 31,~~September 30, 2020. Noninterest income for the nine months ended September 30, 2021 was $64.0 million, an increase of $5.8 million, or 10.0%, from the nine months ended September 30, 2020.

The net gain on mortgage banking activities ~~increased $3.2~~decreased $2.6 million, or ~~116.4%~~45.0%, for the three months ended ~~March 31,~~September 30, 2021 but increased $504 thousand, or 4.2%, for the nine months ended September 30, 2021 from the comparable ~~period~~periods in the prior ~~year~~year. The decrease for the three months ended September 30, 2021 was primarily due to ~~an increase~~a decrease in volume and ~~an expansion~~a contraction of margins. Investment advisory commission and fee income increased ~~$442~~$791 thousand, or ~~10.4%~~19.8%, for the three months ended ~~March 31,~~September 30, 2021 and $2.3 million, or 19.1%, for the nine months ended September 30, 2021 from the comparable ~~period~~periods in the prior year, due to increased assets under management driven by favorable market conditions and new customer relationships.~~Insurance commission and fee~~ BOLI income increased ~~$223~~$184 thousand, or ~~4.7%~~24.8%, for the quarter ended March 31, 2021, primarily due to an increase in premiums for group life and health and commercial lines and an increase in contingent commission income of $36 thousand, which was $1.1 million for each of the quarters ended March 31, 2021 and 2020. Contingent commission income is largely recognized in the first quarter of the year.

~~Other income increased $1.3 million~~ for the three months ended ~~March 31,~~September 30, 2021 and $1.1 million, or 47.8%, for the nine months ended September 30, 2021 from the comparable ~~period~~periods in the prior year, primarily due to tax-free proceeds from BOLI death benefit claims of $893 thousand and $196 thousand received in the second and third quarter of 2021, respectively.

Other service fee income increased $483 thousand, or 23.1%, for the three months ended September 30, 2021 and $2.1 million, or 37.9%, for the nine months ended September 30, 2021 from the comparable periods in the prior year. Interchange fee income increased $290 thousand for the three months ended September 30, 2021 and $962 thousand for the nine months ended September 30, 2021 from the comparable periods in the prior year, due to increased customer activity. Mortgage servicing fees increased $163 thousand for the three months ended September 30, 2021 and $855 thousand for the nine months ended September 30, 2021 from the comparable periods in the prior year, driven by an increase ~~of $967~~in retained servicing associated with elevated mortgage volume over the past eighteen months.

Other income decreased $546 thousand, or 25.1%, for the three months ended September 30, 2021 and $543 thousand, or 13.5%, for the nine months ended September 30, 2021 from the comparable periods in ~~fees~~the prior year. Fees on risk participation agreements for interest rate swaps decreased $1.9 million and $2.3 million for the three and nine months ended September 30, 2021, respectively, from the comparable periods in the prior year driven by a decrease in customer demand. Gain on the sale of SBA loans increased ~~customer activity~~$897 thousand and $922 thousand for the three and nine months ended September 30, 2021, respectively, from the comparable periods in the prior year. This increase was reflective of the Corporation's commitment to delivering comprehensive financial solutions to small businesses and the expansion of the SBA lending team during the first half of 2021. Net gains or losses related to valuations and sales of other real estate owned increased $297 thousand for the three and nine months ended September 30, 2021 from the comparable periods in the prior year, primarily due to a $300 thousand valuation adjustment on other real estate owned during the ~~current rate environment. Additionally,~~third quarter of 2020. Other income increased $456 thousand for the nine months ended September 30, 2021 primarily driven by a gain on the value of equity securities measured at fair value ~~increased $384~~of $164 thousand compared to a loss of $321 thousand for the ~~quarter.~~nine months ended September 30, 2020.

Noninterest Expense

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


		Three Months Ended									Three Months Ended								Nine Months Ended
		March 31,				Change				September 30,			Change				September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2021		2020		Amount		Percent				(Dollars in thousands)	2021		2020		Amount		Percent		2021		2020		Amount		Percent
Salaries, benefits and commissions	Salaries, benefits and commissions	$	24,780	$	23,836	$	944	4.0	%			Salaries, benefits and commissions	26,641		24,059		$	2,582	10.7	%	$	76,817	$	69,595	$	7,222	10.4	%
Net occupancy	Net occupancy	2,739		2,574		165		6.4				Net occupancy	2,525		2,609		(84)		(3.2)		7,920		7,661		259		3.4
Equipment	Equipment	946		995		(49)		(4.9)				Equipment	1,000		972		28		2.9		2,914		2,890		24		0.8
Data processing	Data processing	3,050		2,760		290		10.5				Data processing	3,274		2,862		412		14.4		9,388		8,372		1,016		12.1
Professional fees	Professional fees	1,748		1,317		431		32.7				Professional fees	2,174		1,321		853		64.6		5,937		3,902		2,035		52.2
Marketing and advertising	Marketing and advertising	280		402		(122)		(30.3)				Marketing and advertising	539		463		76		16.4		1,380		1,400		(20)		(1.4)
Deposit insurance premiums	Deposit insurance premiums	636		504		132		26.2				Deposit insurance premiums	765		707		58		8.2		2,014		1,826		188		10.3
Intangible expenses	Intangible expenses	249		330		(81)		(24.5)				Intangible expenses	214		283		(69)		(24.4)		712		934		(222)		(23.8)

Other expense	Other expense	5,112		6,059		(947)		(15.6)				Other expense	6,116		5,251		865		16.5		16,992		16,684		308		1.8
Total noninterest expense	Total noninterest expense	$	39,540	$	38,777	$	763	2.0	%			Total noninterest expense	$	43,248	$	38,527	$	4,721	12.3	%	$	124,074	$	113,264	$	10,810	9.5	%

Three and nine months ended ~~March 31,~~September 30, 2021 versus 2020

Noninterest expense for the three months ended ~~March 31,~~September 30, 2021 was ~~$39.5~~$43.2 million, an increase of ~~$763 thousand,~~$4.7 million, or ~~2.0%~~12.3%, from the three months ended ~~March 31,~~September 30, 2020. Noninterest expense for the nine months ended September 30, 2021 was $124.1 million, an increase of $10.8 million, or 9.5%, from the nine months ended September 30, 2020.

Salaries, benefits and commissions increased ~~$944 thousand,~~$2.6 million, or ~~4.0%~~10.7%, for the three months ended ~~March 31,~~September 30, 2021 and $7.2 million, or 10.4%, for the nine months ended September 30, 2021 from the comparable ~~period~~periods in the prior year. These increases reflect our continued investment in revenue producing staff across all business lines and annual merit increases. Additionally, variable incentive compensation expenses increased $829 thousand and $2.6 million for the three and nine months ended September 30, 2021, respectively, from the comparable periods in the prior year, ~~primarily attributable to additional staff hired to support revenue generation across all business lines, annual merit increases and increased variable compensation~~ due to strong pre-tax pre-provision income during the first quarter of 2021. The increases in salaries, benefits and commissions were offset by $582 thousand of incremental capitalized compensation related to the origination of PPP loans. increased profitability.

Professional fees increased ~~$431~~$853 thousand, or ~~32.7%~~64.6%, for the three months ended ~~March 31,~~September 30, 2021 and $2.0 million, or 52.2%, for the nine months ended September 30, 2021 from the comparable ~~period~~periods in the prior year, primarily attributable to increased consultant fees in support of our Diversity, Equity and Inclusion program, training initiatives and ~~training initiatives.~~treasury management product enhancements. Data processing expenses increased ~~$290~~$412 thousand, or ~~10.5%~~14.4%, for the three months ended ~~March 31,~~September 30, 2021 and $1.0 million, or 12.1%, for the nine months ended September 30, 2021 from the comparable ~~period~~periods in

the prior year, primarily due to continued investments in our end-to-end loan origination solution for loans below $1.0 million, customer relationship management software, internal infrastructure improvements and outsourced data processing solutions. ~~Deposit insurance premiums~~

Other expense increased ~~$132~~$865 thousand, or ~~26.2%~~16.5%, for the three months ended ~~March 31,~~September 30, 2021 from the comparable period in the prior year, ~~primarily~~ due to ~~an increased assessment base due to asset growth.~~

~~Other~~increases in professional liability insurance, bank shares tax 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 $656 thousand charge related to the extinguishment of long-term debt that occurred in the first quarter of 2020interchange fee expense and ~~a $295 thousand decrease in~~ travel and entertainment expenses, ~~due~~which are beginning to ~~COVID-19 related restrictions.~~normalize as the markets we operate in continue to remain open.

Tax Provision

The ~~provision for income taxes~~Corporation recognized a tax expense of $5.3 million and $5.1 million for the three months ended ~~March 31,~~September 30, 2021 and 2020 ~~was $7.8~~resulting in an effective rate of 20.1% and 21.9%, respectively. The Corporation recognized a tax expense of $18.0 million and ~~$(606) thousand, respectively, at~~$4.2 million for the nine months ended September 30, 2021 and 2020 resulting in an effective ~~tax rates~~rate of ~~19.3%~~19.4% and ~~(261.2)%~~16.7%, respectively. The effective tax rates for the ~~quarters~~three and nine months ended ~~March 31,~~September 30, 2021 and 2020 ~~reflect~~reflects the level of pre-tax income and the benefits of tax-exempt income from investments in municipal securities and loans and leases. ~~The calculation of~~Additionally, the effective ~~tax rate for~~ income ~~taxes for the quarter ended 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,~~nine months ended September 30, 2021 was favorably impacted by discrete tax benefits and ~~its potential impact on the Corporation’s estimate of the annual effective tax rate.~~proceeds from BOLI death benefits.

Financial Condition

Assets

The following table presents assets at the dates indicated:


		At March 31, 2021		At December 31, 2020		Change					At September 30, 2021		At December 31, 2020		Change
(Dollars in thousands)	(Dollars in thousands)					Amount		Percent		(Dollars in thousands)					Amount		Percent
Cash and interest-earning deposits		$	187,317	$	219,858	$	(32,541)	(14.8	%)
Cash and cash equivalents										Cash and cash equivalents	$	902,357	$	219,858	$	682,499	310.4	%
Investment securities, net of allowance for credit losses	Investment securities, net of allowance for credit losses	377,506		373,176		4,330		1.2		Investment securities, net of allowance for credit losses	393,377		373,176		20,201		5.4
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	25,571		28,183		(2,612)		(9.3)		Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	28,679		28,183		496		1.8
Loans held for sale	Loans held for sale	22,636		37,039		(14,403)		(38.9)		Loans held for sale	29,093		37,039		(7,946)		(21.5)
Loans and leases held for investment	Loans and leases held for investment	5,415,006		5,306,841		108,165		2.0		Loans and leases held for investment	5,252,045		5,306,841		(54,796)		(1.0)
Allowance for credit losses, loans and leases	Allowance for credit losses, loans and leases	(71,497)		(83,044)		11,547		13.9		Allowance for credit losses, loans and leases	(70,146)		(83,044)		12,898		15.5
Premises and equipment, net	Premises and equipment, net	55,650		55,636		14		—		Premises and equipment, net	55,354		55,636		(282)		(0.5)
Operating lease right-of-use assets	Operating lease right-of-use assets	34,317		34,325		(8)		—		Operating lease right-of-use assets	31,570		34,325		(2,755)		(8.0)
Goodwill and other intangibles, net	Goodwill and other intangibles, net	181,784		181,425		359		0.2		Goodwill and other intangibles, net	181,918		181,425		493		0.3
Bank owned life insurance	Bank owned life insurance	118,435		117,718		717		0.6		Bank owned life insurance	117,981		117,718		263		0.2
Accrued interest receivable and other assets	Accrued interest receivable and other assets	69,940		65,339		4,601		7.0		Accrued interest receivable and other assets	57,624		65,339		(7,715)		(11.8)
Total assets	Total assets	$	6,416,665	$	6,336,496	$	80,169	1.3	%	Total assets	$	6,979,852	$	6,336,496	$	643,356	10.2	%

Cash and Interest-Earning Deposits

Cash and interest-earning deposits ~~decreased $32.5~~increased $682.5 million, or ~~14.8%~~310.4%, from December 31, 2020, primarily due to ~~decreased cash letters of $24.1 million and decreased~~increased interest earning deposits at the Federal Reserve Bank of ~~$8.1 million.~~$675.2 million, which stems from excess cash on hand due to deposit growth.

Investment Securities

Total ~~investments~~investment securities at ~~March 31,~~September 30, 2021 increased ~~$4.3~~$20.2 million, or ~~1.2%~~5.4%, from December 31, 2020. Purchases of ~~$39.3~~$122.8 million, increases in the fair value of available-for-sale investment securities of ~~$1.7~~$1.4 million and a reversal of provision for credit losses of ~~$384~~$54 thousand were partially offset by maturities and pay-downs of ~~$29.6~~$81.1 million, calls of $11.1 million, sales of ~~$3.6 million, calls of $3.3~~$10.0 million and net amortization of purchased premiums and discounts of ~~$806 thousand.~~$2.2 million.

Loans and Leases

Gross loans and leases held for investment ~~increased $108.2~~decreased $54.8 million, or ~~2.0%~~1.0%, from December 31, 2020. Gross loans and leases held for investment, excluding PPP loans, at September 30, 2021 increased $343.4 million or 7.1% from December 31, 2020. The growth in gross loans and leases held for investment, excluding PPP loans, was primarily due to increases in commercial, construction, commercial real estate, ~~loans of $72.8 million~~ and ~~PPP loan increases of $44.7 million.~~residential mortgage loans.

Asset Quality

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

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.

Nonperforming assets were $37.1 million at September 30, 2021 and $40.5 million at December 31, 2020. At ~~March 31,~~September 30, 2021 nonaccrual loans and leases and accruing troubled debt restructured loans were ~~$30.0~~$34.6 million and had a related allowance for credit losses on loans and leases of ~~$281~~$15 thousand. At December 31, 2020, nonaccrual loans and leases and accruing troubled debt restructured loans were $31.7 million and had a related allowance for credit losses on loans and leases of $585 thousand. Individual reserves have been established based on current facts and management's judgements about the ultimate outcome of these credits, including the most recent known data available on any related underlying collateral and

the borrower's cash flows. ~~During~~

Net loan and lease recoveries for the ~~first quarter of~~three months ended September 30, 2021 ~~three~~were $75 thousand compared to $35 thousand for the same period in the prior year. Net loan and lease charge-offs for the nine months ended September 30, 2021 were $456 thousand compared to $4.0 million for the same period in the prior year. The nine months ended September 30, 2020 included a $2.7 million charge-off related to a commercial real estate ~~loans to one borrower totaling $126 thousand were transferred from nonaccrual loans to other real estate owned.~~loan.

Other real estate owned was ~~$7.5 million~~$279 thousand and $7.4 million at ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. The decrease of $7.1 million was related to the sale of a commercial real estate property in the second quarter of 2021 which was transferred to other real estate owned in the second quarter of 2020.

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 March 31, 2021			At December 31, 2020			(Dollars in thousands)	At September 30, 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	$	2,006		$	2,827		Commercial, financial and agricultural	$	933		$	2,827
Real estate—commercial	Real estate—commercial	22,026			22,739			Real estate—commercial	28,296			22,739

Real estate—residential	Real estate—residential	5,815			5,919			Real estate—residential	5,269			5,919

Lease financings	Lease financings	149			207			Lease financings	30			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*	29,996			31,692			Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications*	34,528			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	52			53			Accruing troubled debt restructured loans and lease modifications not included in the above	51			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	40			50			Commercial, financial and agricultural	2,000			50
Real estate—commercial	Real estate—commercial	—			945			Real estate—commercial	—			945

Real estate—residential		403			—

Loans to individuals	Loans to individuals	123			185			Loans to individuals	58			185
Lease financings	Lease financings	98			212			Lease financings	146			212
Total accruing loans and leases, 90 days or more past due	Total accruing loans and leases, 90 days or more past due	664			1,392			Total accruing loans and leases, 90 days or more past due	2,204			1,392
Total nonperforming loans and leases	Total nonperforming loans and leases	30,712			33,137			Total nonperforming loans and leases	36,783			33,137
Other real estate owned	Other real estate owned	7,481			7,355			Other real estate owned	279			7,355
Total nonperforming assets	Total nonperforming assets	$	38,193		$	40,492		Total nonperforming assets	$	37,062		$	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	0.55		%	0.60		%	Nonaccrual loans and leases (including nonaccrual troubled debt restructured loans and lease modifications) / loans and leases held for investment	0.66		%	0.60		%
Nonperforming loans and leases / loans and leases held for investment	Nonperforming loans and leases / loans and leases held for investment	0.57		%	0.62		%	Nonperforming loans and leases / loans and leases held for investment	0.70		%	0.62		%
Nonperforming assets / total assets	Nonperforming assets / total assets	0.60		%	0.64		%	Nonperforming assets / total assets	0.53		%	0.64		%

Allowance for credit losses, loans and leases	Allowance for credit losses, loans and leases	$	71,497		$	83,044		Allowance for credit losses, loans and leases	$	70,146		$	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	1.32		%	1.56		%	Allowance for credit losses, loans and leases / loans and leases held for investment	1.34		%	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	238.36		%	262.03		%	Allowance for credit losses, loans and leases / nonaccrual loans and leases held for investment	203.16		%	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	232.80		%	250.61		%	Allowance for credit losses, loans and leases / nonperforming loans and leases held for investment	190.70		%	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	$	13,520		$	14,069		* Nonaccrual troubled debt restructured loans and lease modifications included in nonaccrual loans and leases in the above table	$	2,418		$	14,069

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


(Dollars in thousands)	(Dollars in thousands)	At March 31, 2021		At December 31, 2020		(Dollars in thousands)	At September 30, 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	$	29,996	$	31,692	Total nonaccrual loans and leases, including nonaccrual troubled debt restructured loans and lease modifications	$	34,528	$	31,692
Nonaccrual loans and leases with partial charge-offs	Nonaccrual loans and leases with partial charge-offs	4,676		4,227		Nonaccrual loans and leases with partial charge-offs	3,118		4,227
Life-to-date partial charge-offs on nonaccrual loans and leases	Life-to-date partial charge-offs on nonaccrual loans and leases	1,761		2,377		Life-to-date partial charge-offs on nonaccrual loans and leases	2,269		2,377
Specific reserves on individually analyzed loans	Specific reserves on individually analyzed loans	281		585		Specific reserves on individually analyzed loans	15		585

Reporting for Financial Institutions Working with Customers Affected by the Coronavirus and have not categorized these modifications as troubled debt restructurings. As of ~~March 31,~~September 30, 2021, there were approximately 5414 loan and lease modifications outstanding with principal balances totaling ~~$73.0~~$18.1 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, and certain loan modifications segmented by industry description for commercial loans and segmented by loan category for other loan types as of ~~March 31,~~September 30, 2021:


(Dollars in thousands)	(Dollars in thousands)	As of March 31, 2021								(Dollars in thousands)	As of September 30, 2021
Industry Description	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)		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	CRE - Retail	$	356,690	8.8	%	$	—	—	%	CRE - Retail	$	365,379	8.6	%	$	—	—	%
Animal Production	Animal Production	269,608		6.7		27		—		Animal Production	291,723		6.8		—		—
CRE - 1-4 Family Residential Investment										CRE - 1-4 Family Residential Investment	255,116		6.0		—		—
CRE - Office	CRE - Office	247,320		6.1		—		—		CRE - Office	240,011		5.6		—		—
CRE - 1-4 Family Residential Investment		246,643		6.1		1,097		0.4
CRE - Multi-family	CRE - Multi-family	213,065		5.3		—		—		CRE - Multi-family	206,667		4.8		—		—
CRE - Industrial / Warehouse	CRE - Industrial / Warehouse	180,254		4.5		738		0.4		CRE - Industrial / Warehouse	180,421		4.2		—		—
Nursing and Residential Care Facilities										Nursing and Residential Care Facilities	171,482		4.0		—		—
Hotels & Motels (Accommodation)	Hotels & Motels (Accommodation)	174,751		4.3		35,222		20.2		Hotels & Motels (Accommodation)	170,042		4.0		10,613		6.2 %
Education	Education	155,589		3.9		2,638		1.7		Education	156,395		3.7		—		—
Nursing and Residential Care Facilities		152,016		3.8		—		—
Specialty Trade Contractors										Specialty Trade Contractors	122,222		2.9		—		—
CRE - Mixed-Use - Residential	CRE - Mixed-Use - Residential	120,629		3.0		3,530		2.9		CRE - Mixed-Use - Residential	120,873		2.8		—		—
Specialty Trade Contractors		117,204		2.9		85		0.1
CRE - Medical Office										CRE - Medical Office	103,553		2.4		—		—
Real Estate Lenders, Secondary Market Financing	Real Estate Lenders, Secondary Market Financing	106,027		2.6		12		—		Real Estate Lenders, Secondary Market Financing	98,983		2.3		—		—
CRE - Medical Office		93,834		2.3		—		—
Homebuilding (tract developers, remodelers)	Homebuilding (tract developers, remodelers)	81,879		2.0		—		—		Homebuilding (tract developers, remodelers)	92,782		2.2		—		—
Merchant Wholesalers, Durable Goods	Merchant Wholesalers, Durable Goods	73,063		1.8		—		—		Merchant Wholesalers, Durable Goods	87,849		2.1		—		—
Crop Production	Crop Production	69,853		1.7		—		—		Crop Production	75,439		1.8		—		—
Private Equity & Special Purpose Entities										Private Equity & Special Purpose Entities	74,026		1.7		—		—
Rental and Leasing Services										Rental and Leasing Services	70,499		1.7		—		—
Motor Vehicle and Parts Dealers	Motor Vehicle and Parts Dealers	65,839		1.6		—		—		Motor Vehicle and Parts Dealers	66,880		1.6		—		—
Rental and Leasing Services		61,096		1.5		—		—
Food Manufacturing										Food Manufacturing	65,857		1.5		—		—
Wood Product Manufacturing										Wood Product Manufacturing	64,403		1.5		—		—
Fabricated Metal Product Manufacturing	Fabricated Metal Product Manufacturing	60,472		1.5		—		—		Fabricated Metal Product Manufacturing	60,991		1.4		—		—
Merchant Wholesalers, Nondurable Goods										Merchant Wholesalers, Nondurable Goods	60,276		1.4		—		—
Food Services and Drinking Places										Food Services and Drinking Places	57,794		1.3		—		—
Administrative and Support Services	Administrative and Support Services	58,298		1.4		101		0.2		Administrative and Support Services	53,430		1.3		104		0.2
Wood Product Manufacturing		57,180		1.4		—		—
Food Services and Drinking Places		53,168		1.3		3,300		6.2
Miniwarehouse/Self-Storage										Miniwarehouse/Self-Storage	52,815		1.2		—		—
Industries with >$50 million in outstandings	Industries with >$50 million in outstandings	$	3,014,478	74.5	%	$	46,750	1.6	%	Industries with >$50 million in outstandings	$	3,365,908	78.8	%	$	10,717	0.3	%
Industries with <$50 million in outstandings	Industries with <$50 million in outstandings	$	1,026,671	25.5	%	$	24,277	2.4	%	Industries with <$50 million in outstandings	$	903,880	21.2	%	$	6,878	0.8	%
Total Commercial Loans	Total Commercial Loans	$	4,041,149	100.0	%	$	71,027	1.8	%	Total Commercial Loans	$	4,269,788	100.0	%	$	17,595	0.4	%

Consumer Loans and Lease Financings	Consumer Loans and Lease Financings	Total Outstanding Balance				$ Balance of Modified Loans (1)		Modified Loans as a % of Portfolio (excl PPP) (1)		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	Real Estate-Residential Secured for Personal Purpose	$	494,349			$	1,712	0.3	%	Real Estate-Residential Secured for Personal Purpose	$	535,705			$	337	0.1	%
Real Estate-Home Equity Secured for Personal Purpose	Real Estate-Home Equity Secured for Personal Purpose	162,529				84		0.1		Real Estate-Home Equity Secured for Personal Purpose	159,029				—		—
Loans to Individuals	Loans to Individuals	25,468				—		—		Loans to Individuals	26,458				15		0.1
Lease Financings	Lease Financings	163,059				212		0.1		Lease Financings	175,464				107		0.1
Total Consumer Loans and Lease Financings	Total Consumer Loans and Lease Financings	$	845,405			$	2,008	0.2	%	Total Consumer Loans and Lease Financings	$	896,656			$	459	0.1	%

Total	Total	$	4,886,554			$	73,035	1.5	%	Total	$	5,166,444			$	18,054	0.3	%

(1) Loan modifications referenced above were made in accordance with Section 4013 of the CARES Act, the Consolidated Appropriations Act, 2021 and the~~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 as of ~~March 31,~~September 30, 2021.

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 ~~$1.0~~$892 thousand and $1.1 million ~~and $982 thousand~~ for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively. The amortization of intangible assets was $2.9 million and $3.3 million for the nine months ended September 30, 2021 and 2020, respectively. See Note 5 to the Condensed Unaudited Consolidated Financial Statements, "Goodwill and Other Intangible Assets," for a summary of intangible assets at ~~March 31,~~September 30, 2021 and December 31, 2020.

5060

The Corporation also has goodwill with a net carrying value of $172.6 million at ~~March 31,~~September 30, 2021 and December 31, 2020, which is deemed to be an indefinite intangible asset and is not amortized. The Corporation completes a goodwill impairment analysis 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 ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 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 March 31, 2021		At December 31, 2020		Change				(Dollars in thousands)	At September 30, 2021		At December 31, 2020		Change
						Amount		Percent							Amount		Percent
Deposits	Deposits	$	5,311,592	$	5,242,715	$	68,877	1.3	%	Deposits	$	5,938,154	$	5,242,715	$	695,439	13.3	%
Short-term borrowings	Short-term borrowings	26,676		17,906		8,770		49.0		Short-term borrowings	14,101		17,906		(3,805)		(21.2)
Long-term debt	Long-term debt	95,000		110,000		(15,000)		(13.6)		Long-term debt	95,000		110,000		(15,000)		(13.6)
Subordinated notes	Subordinated notes	173,617		183,515		(9,898)		(5.4)		Subordinated notes	98,797		183,515		(84,718)		(46.2)
Operating lease liabilities	Operating lease liabilities	37,737		37,690		47		0.1		Operating lease liabilities	34,641		37,690		(3,049)		(8.1)
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	49,588		52,198		(2,610)		(5.0)		Accrued interest payable and other liabilities	43,136		52,198		(9,062)		(17.4)
Total liabilities	Total liabilities	$	5,694,210	$	5,644,024	$	50,186	0.9	%	Total liabilities	$	6,223,829	$	5,644,024	$	579,805	10.3	%

Deposits

Total deposits increased ~~$68.9~~$695.4 million, or ~~1.3%~~13.3%, from December 31, 2020, primarily due to increases in commercial, consumer and ~~commercial~~public funds deposits offset by a decrease in ~~public funds and~~ brokered deposits.

Borrowings

Total borrowings decreased ~~$16.1~~$103.5 million, or ~~5.2%~~33.2%, from December 31, ~~2020. Long-term~~2020, due to decreases in short-term borrowings of $3.8 million, a decrease in long-term debt ~~decreased~~of $15.0 million, primarily due to maturities of FHLB advances, and a decrease in subordinated notes ~~decreased $9.8~~of $84.7 million, primarily due to a ~~$10.0~~$85.0 million redemption of the previously issued 2016 and 2015 subordinated ~~notes. These decreases were partially offset by an $8.8 million increase in short-term customer repurchase agreements.~~

~~Other 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 $2.5 million and $2.4 million at March 31, 2021 and December 31, 2020, respectively. The increase was due to lower line utilization, which results in higher potential funding amounts.notes during the year.

Shareholders’ Equity

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


(Dollars in thousands)	(Dollars in thousands)	At March 31, 2021		At December 31, 2020		Change				(Dollars in thousands)	At September 30, 2021		At December 31, 2020		Change
						Amount		Percent							Amount		Percent
Common stock	Common stock	$	157,784	$	157,784	$	—	—	%	Common stock	$	157,784	$	157,784	$	—	—	%
Additional paid-in capital	Additional paid-in capital	296,177		296,186		(9)		—		Additional paid-in capital	298,033		296,186		1,847		0.6
Retained earnings	Retained earnings	333,581		306,899		26,682		8.7		Retained earnings	363,607		306,899		56,708		18.5
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(20,440)		(22,144)		1,704		(7.7)		Accumulated other comprehensive loss	(20,073)		(22,144)		2,071		(9.4)
Treasury stock	Treasury stock	(44,647)		(46,253)		1,606		(3.5)		Treasury stock	(43,328)		(46,253)		2,925		(6.3)
Total shareholders’ equity	Total shareholders’ equity	$	722,455	$	692,472	$	29,983	4.3	%	Total shareholders’ equity	$	756,023	$	692,472	$	63,551	9.2	%

Total shareholders' equity increased ~~$30.0~~$63.6 million, or ~~4.3%~~9.2%, from December 31, 2020. Retained earnings at ~~March 31,~~September 30, 2021 increased by ~~$26.7~~$56.7 million primarily due to net income of ~~$32.6~~$74.4 million offset by ~~$5.9~~$17.6 million of cash dividends ~~declared and~~ paid for the ~~three~~nine months ended ~~March 31,~~September 30, 2021. ~~Accumulated other comprehensive loss decreased by $1.7 million mainly~~

~~attributable to increases in the fair value of available-for-sale investment securities of $1.4 million, net of tax.~~ Treasury stock decreased ~~$1.6~~$2.9 million from December 31, 2020 primarily due to stock issued under dividend reinvestment and employee stock purchase plans and stock-based incentive plan activity. Accumulated other comprehensive loss decreased by $2.1 million, primarily attributable to increases in the fair value of available-for-sale investment securities of $1.1 million, net of tax.

Discussion of Segments

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

The Banking segment reported pre-tax income of ~~$40.0~~$25.7 million and ~~pre-tax loss of $1.5~~$22.7 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and pre-tax income of $91.4 million and $22.2 million for the nine months ended September 30, 2021 and 2020, respectively. See the section of this MD&A under the headings ~~"Net Interest Income", "Interest Income", "Interest Expense",~~"Results of Operations" and ~~"Provision for Credit Losses"~~"Financial Condition" for a discussion of key items impacting the Banking Segment.

The Wealth Management segment reported pre-tax income of ~~$2.4~~$1.9 million and ~~$1.9~~$2.0 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively and $6.5 million and $5.4 million for the nine months ended September 30, 2021 and 2020, respectively. Noninterest income was ~~$6.8~~$7.0 million and ~~$6.2~~$6.0 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, respectively, and $20.5 million and $17.7 million for the nine months ended September 30, 2021 and 2020, respectively. The increase in pre-tax income and noninterest income for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 compared to the ~~three~~nine months ended ~~March 31,~~September 30, 2020 was primarily due to ~~appreciation of~~increased assets under management and supervision ~~as a majority of investment advisory fees are billed based on the prior quarter-end assets under management~~driven by favorable market conditions and ~~supervision balance.~~new customer relationships. Assets under management and supervision were ~~$4.2~~$4.6 billion as of ~~March 31,~~September 30, 2021, $4.5 billion as of June 30, 2021, $4.1 billion as of December 31, 2020, ~~$3.3 billion as of March 31, 2020 and~~ $3.8 billion as of ~~December 31, 2019. The increase in assets under management~~September 30, 2020 and ~~supervision~~$3.6 billion as of $116.1 million for the period from December 31, 2020 to March 31, 2021 and $926.7 million for the period from March 31, 2020 to March 31, 2021 was primarily due to the general improvement in the equity markets and new customer relationships.June 30, 2020.

The Insurance segment reported pre-tax income of ~~$1.6 million~~$597 thousand and $822 thousand for ~~both~~ the three months ended ~~March 31,~~September 30, 2021 and ~~2020.~~2020, respectively, and $2.9 million and $3.5 million for the nine months ended September 30, 2021 and 2020, respectively. Noninterest income was ~~$5.1~~$4.0 million and ~~$4.9~~$3.9 million for the three months ended ~~March 31,~~September 30, 2021 and 2020, ~~respectively.~~respectively, and $13.1 million and $13.0 million for the nine months ended September 30, 2021 and 2020. The ~~increase~~decrease in ~~noninterest~~pre-tax income for the three and nine months ended ~~March 31,~~September 30, 2021 was primarily due to ~~an increase~~increases in ~~insurance commissions of $127 thousand compared~~salary expense as we continue to ~~the same period~~invest in ~~the prior year.~~revenue producing positions.

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 2.50% 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 ~~March 31,~~September 30, 2021.

5262

Table 5—Regulatory Capital

The Corporation's and Bank's actual and required capital ratios as of ~~March 31,~~September 30, 2021 and December 31, 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 March 31, 2021
At September 30, 2021														At September 30, 2021
Total Capital (to Risk-Weighted Assets):	Total Capital (to Risk-Weighted Assets):													Total Capital (to Risk-Weighted Assets):
Corporation	Corporation	$	804,632	15.13	%	$	425,322	8.00	%	$	531,653	10.00	%	Corporation	$	775,691	13.87	%	$	447,422	8.00	%	$	559,278	10.00	%
Bank	Bank	634,728		11.98		423,859		8.00		529,824		10.00		Bank	654,784		11.75		445,683		8.00		557,104		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	589,084		11.08		318,992		6.00		425,322		8.00		Corporation	623,607		11.15		335,567		6.00		447,422		8.00
Bank	Bank	580,797		10.96		317,894		6.00		423,859		8.00		Bank	601,497		10.80		334,262		6.00		445,683		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	589,084		11.08		239,244		4.50		345,575		6.50		Corporation	623,607		11.15		251,675		4.50		363,531		6.50
Bank	Bank	580,797		10.96		238,421		4.50		344,386		6.50		Bank	601,497		10.80		250,697		4.50		362,117		6.50
Tier 1 Capital (to Average Assets):	Tier 1 Capital (to Average Assets):													Tier 1 Capital (to Average Assets):
Corporation	Corporation	589,084		9.45		249,290		4.00		311,612		5.00		Corporation	623,607		9.53		261,801		4.00		327,251		5.00
Bank	Bank	580,797		9.35		248,556		4.00		310,695		5.00		Bank	601,497		9.22		260,951		4.00		326,189		5.00
At December 31, 2020	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	$	801,368	15.31	%	$	418,811	8.00	%	$	523,513	10.00	%	Corporation	$	801,368	15.31	%	$	418,811	8.00	%	$	523,513	10.00	%
Bank	Bank	632,183		12.12		417,416		8.00		521,769		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	563,491		10.76		314,108		6.00		418,811		8.00		Corporation	563,491		10.76		314,108		6.00		418,811		8.00
Bank	Bank	569,821		10.92		313,062		6.00		417,416		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	563,491		10.76		235,581		4.50		340,284		6.50		Corporation	563,491		10.76		235,581		4.50		340,284		6.50
Bank	Bank	569,821		10.92		234,796		4.50		339,150		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	563,491		9.08		248,224		4.00		310,280		5.00		Corporation	563,491		9.08		248,224		4.00		310,280		5.00
Bank	Bank	569,821		9.21		247,494		4.00		309,368		5.00		Bank	569,821		9.21		247,494		4.00		309,368		5.00

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

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 iswas 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, the U.S. Department of the 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~~corporations that adopted CECL before December 31, 2020 to defer 100 percent of the ~~day one~~day-one transitional amounts ~~described above through~~

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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.

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.

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 utilizing on-balance sheet liquidity and 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.

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Recent Accounting Pronouncements

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

Recent Regulatory and Legislative Developments

Coronavirus Response and Relief Supplemental Appropriations Act, of 2021

On December 27, 2020, the Coronavirus Response and Relief Supplemental Appropriations Act, of 2021 ("CRRSA Act") was signed into law, which contains provisions that could directly impact financial institutions including: (1) extending until January 1, 2022 when insured depository institutions and depository institution holding companies have to comply with the current expected credit losses (CECL) accounting standard; and (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 CRRSA Act directs financial regulators to support community development financial institutions and minority depository institutions and directs Congress to re-appropriate $429 billion in unobligated CARES Act funds. The PPP, which was originally established under the CARES Act, was also extended under the 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, 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 ~~March 31,~~September 30, 2021.

Changes in Internal Control over Financial Reporting

There were no changes in the Corporation's internal control over financial reporting (as defined in Rule 13a-15(f)) during the quarter ended ~~March 31,~~September 30, 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

There have been no material changes in risk factors applicable to the Corporation from those disclosed in "Risk Factors" in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2020.

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
~~January~~July 1 – 31, 2021	—	$	—	—	679,174
~~February~~August 1 – ~~28,~~31, 2021	—	—		—	679,174
~~March~~September 1 – ~~31,~~30, 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~~the repurchase 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 stock options. Shares withheld to 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. Shares repurchased pursuant to these plans during the three months ended ~~March 31,~~September 30, 2021 were as follows:

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


Period	Total Number of Shares Purchased	Average Price Paid per Share
July 1 – 31, 2021	—	$	—
August 1 – 31, 2021	—	—
September 1 – 30, 2021	—	—
Total	—	$	—

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


a.	Exhibits

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

	Exhibit 3.2	Amended By-Laws are incorporated by reference to Exhibit 3.2 of Form 8 -K, filed with the SEC on 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.~~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 ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2021, formatted in Inline XBRL.

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SIGNATURES

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


			Univest Financial Corporation
			(Registrant)

Date: ~~May 3,~~November 2, 2021			/s/ Jeffrey M. Schweitzer
			Jeffrey M. Schweitzer President and Chief Executive Officer (Principal Executive Officer)

Date: ~~May 3,~~November 2, 2021			/s/ Brian J. Richardson
			Brian J. Richardson Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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