~~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, 2023


☐			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						~~29,429,373~~29,508,128
(Title of Class)						(Number of shares outstanding at ~~May 1,~~October 31, 2023)

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 September ~~March~~ 3 1 ~~, 202~~3 30, 2023 and December 31, 2022	2

		Condensed Consolidated Statements of Income for the Three and Nine Months Ended MSeptember~~arch 31~~ 30, 202 3 and 2022	3

		Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended MSeptember~~arch 31~~ 30, 202 3 and 2022	4

		Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Three and Nine Months Ended M~~arch 31, 202~~3 ~~and~~ 2~~022~~	5

		~~Condensed Consolidated Statements of Cash Flows for the~~ ~~Three~~ ~~Months Ended~~ M~~arch 31~~September 30, 202 3 and 2022	6

		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 202 3 and 2022	8

		Notes to Condensed Consolidated Financial Statements	710

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3945

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5361

	Item 4.	Controls and Procedures	5361

Part II.	Other Information

	Item 1.	Legal Proceedings	5361

	Item 1A.	Risk Factors	5362

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5462

	Item 3.	Defaults Upon Senior Securities	5462

	Item 4.	Mine Safety Disclosures	5462

	Item 5.	Other Information	5562

	Item 6.	Exhibits	5663

Signatures			5764

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS


		(Unaudited)					(Unaudited)
(Dollars in thousands, except share data)	(Dollars in thousands, except share data)	At March 31, 2023		At December 31, 2022		(Dollars in thousands, except share data)	At September 30, 2023		At December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	71,215	$	84,176	Cash and due from banks	$	68,900	$	84,176
Interest-earning deposits with other banks	Interest-earning deposits with other banks	67,109		68,623		Interest-earning deposits with other banks	221,441		68,623
Cash and cash equivalents	Cash and cash equivalents	138,324		152,799		Cash and cash equivalents	290,341		152,799

Investment securities held-to-maturity (fair value $133,147 and $134,068 at March 31, 2023 and December 31, 2022, respectively)		151,347		154,727
Investment securities available-for-sale (amortized cost $414,118 and $402,111, net of allowance for credit losses of $1,432 and $1,140 at March 31, 2023 and December 31, 2022, respectively)		367,656		350,256
Investment securities held-to-maturity (fair value $123,760 and $134,068 at September 30, 2023 and December 31, 2022, respectively)						Investment securities held-to-maturity (fair value $123,760 and $134,068 at September 30, 2023 and December 31, 2022, respectively)	149,451		154,727
Investment securities available-for-sale (amortized cost $396,804 and $402,111, net of allowance for credit losses of $1,537 and $1,140 at September 30, 2023 and December 31, 2022, respectively)						Investment securities available-for-sale (amortized cost $396,804 and $402,111, net of allowance for credit losses of $1,537 and $1,140 at September 30, 2023 and December 31, 2022, respectively)	334,538		350,256
Investments in equity securities	Investments in equity securities	3,105		2,579		Investments in equity securities	4,054		2,579
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	43,792		33,841		Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	42,417		33,841
Loans held for sale	Loans held for sale	5,425		5,037		Loans held for sale	16,473		5,037
Loans and leases held for investment	Loans and leases held for investment	6,239,804		6,123,230		Loans and leases held for investment	6,574,958		6,123,230
Less: Allowance for credit losses, loans and leases	Less: Allowance for credit losses, loans and leases	(80,034)		(79,004)		Less: Allowance for credit losses, loans and leases	(83,837)		(79,004)
Net loans and leases held for investment	Net loans and leases held for investment	6,159,770		6,044,226		Net loans and leases held for investment	6,491,121		6,044,226
Premises and equipment, net	Premises and equipment, net	52,334		50,939		Premises and equipment, net	51,287		50,939
Operating lease right-of-use assets	Operating lease right-of-use assets	31,663		30,059		Operating lease right-of-use assets	31,053		30,059
Goodwill	Goodwill	175,510		175,510		Goodwill	175,510		175,510
Other intangibles, net of accumulated amortization	Other intangibles, net of accumulated amortization	11,044		11,384		Other intangibles, net of accumulated amortization	11,079		11,384
Bank owned life insurance	Bank owned life insurance	128,926		120,297		Bank owned life insurance	130,522		120,297
Accrued interest receivable and other assets	Accrued interest receivable and other assets	90,095		90,362		Accrued interest receivable and other assets	100,220		90,362
Total assets	Total assets	$	7,358,991	$	7,222,016	Total assets	$	7,828,066	$	7,222,016
LIABILITIES	LIABILITIES					LIABILITIES
Noninterest-bearing deposits	Noninterest-bearing deposits	$	1,799,225	$	2,047,263	Noninterest-bearing deposits	$	1,432,559	$	2,047,263
Interest-bearing deposits	Interest-bearing deposits	4,035,432		3,866,263		Interest-bearing deposits	5,006,606		3,866,263
Total deposits	Total deposits	5,834,657		5,913,526		Total deposits	6,439,165		5,913,526
Short-term borrowings	Short-term borrowings	271,881		197,141		Short-term borrowings	14,676		197,141
Long-term debt	Long-term debt	220,000		95,000		Long-term debt	320,000		95,000
Subordinated notes	Subordinated notes	148,385		148,260		Subordinated notes	148,636		148,260
Operating lease liabilities	Operating lease liabilities	34,846		33,153		Operating lease liabilities	34,017		33,153
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	50,726		58,436		Accrued interest payable and other liabilities	64,374		58,436
Total liabilities	Total liabilities	6,560,495		6,445,516		Total liabilities	7,020,868		6,445,516
SHAREHOLDERS’ EQUITY	SHAREHOLDERS’ EQUITY					SHAREHOLDERS’ EQUITY
Common stock, $5 par value: 48,000,000 shares authorized at March 31, 2023 and December 31, 2022; 31,556,799 shares issued at March 31, 2023 and December 31, 2022; 29,427,696 and 29,271,915 shares outstanding at March 31, 2023 and December 31, 2022, respectively		157,784		157,784
Common stock, $5 par value: 48,000,000 shares authorized at September 30, 2023 and December 31, 2022; 31,556,799 shares issued at September 30, 2023 and December 31, 2022; 29,508,128 and 29,271,915 shares outstanding at September 30, 2023 and December 31, 2022, respectively						Common stock, $5 par value: 48,000,000 shares authorized at September 30, 2023 and December 31, 2022; 31,556,799 shares issued at September 30, 2023 and December 31, 2022; 29,508,128 and 29,271,915 shares outstanding at September 30, 2023 and December 31, 2022, respectively	157,784		157,784
Additional paid-in capital	Additional paid-in capital	298,167		300,808		Additional paid-in capital	300,171		300,808
Retained earnings	Retained earnings	443,493		428,637		Retained earnings	464,634		428,637
Accumulated other comprehensive loss, net of tax benefit	Accumulated other comprehensive loss, net of tax benefit	(55,550)		(62,104)		Accumulated other comprehensive loss, net of tax benefit	(71,586)		(62,104)
Treasury stock, at cost; 2,129,103 and 2,284,884 shares at March 31, 2023 and December 31, 2022, respectively		(45,398)		(48,625)
Treasury stock, at cost; 2,048,671 and 2,284,884 shares at September 30, 2023 and December 31, 2022, respectively						Treasury stock, at cost; 2,048,671 and 2,284,884 shares at September 30, 2023 and December 31, 2022, respectively	(43,805)		(48,625)
Total shareholders’ equity	Total shareholders’ equity	798,496		776,500		Total shareholders’ equity	807,198		776,500
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,358,991	$	7,222,016	Total liabilities and shareholders’ equity	$	7,828,066	$	7,222,016

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					Three Months Ended				Nine Months Ended
		March 31,					September 30,				September 30,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2023		2022				(Dollars in thousands, except per share data)	2023		2022		2023		2022
Interest income	Interest income					Interest income
Interest and fees on loans and leases	Interest and fees on loans and leases	$	78,655	$	48,106			Interest and fees on loans and leases	$	90,974	$	63,162	$	254,949	$	164,065
Interest and dividends on investment securities:	Interest and dividends on investment securities:							Interest and dividends on investment securities:
Taxable	Taxable	3,495		2,365				Taxable	3,540		3,013		10,547		8,116
Exempt from federal income taxes	Exempt from federal income taxes	15		15				Exempt from federal income taxes	15		15		44		44
Interest on deposits with other banks	Interest on deposits with other banks	479		357				Interest on deposits with other banks	1,865		252		2,856		1,433
Interest and dividends on other earning assets	Interest and dividends on other earning assets	609		355				Interest and dividends on other earning assets	712		435		2,102		1,134
Total interest income	Total interest income	83,253		51,198				Total interest income	97,106		66,877		270,498		174,792
Interest expense	Interest expense							Interest expense
Interest on deposits	Interest on deposits	18,336		2,891				Interest on deposits	37,082		6,451		82,885		12,928
Interest on short-term borrowings	Interest on short-term borrowings	2,728		2				Interest on short-term borrowings	1,117		524		7,094		537
Interest on long-term debt and subordinated notes	Interest on long-term debt and subordinated notes	2,872		1,645				Interest on long-term debt and subordinated notes	5,317		1,652		13,282		4,946
Total interest expense	Total interest expense	23,936		4,538				Total interest expense	43,516		8,627		103,261		18,411
Net interest income	Net interest income	59,317		46,660				Net interest income	53,590		58,250		167,237		156,381
Provision (reversal of provision) for credit losses		3,387		(3,450)
Provision for credit losses								Provision for credit losses	2,024		3,558		8,839		6,782
Net interest income after provision for credit losses	Net interest income after provision for credit losses	55,930		50,110				Net interest income after provision for credit losses	51,566		54,692		158,398		149,599
Noninterest income	Noninterest income							Noninterest income
Trust fee income	Trust fee income	1,955		2,102				Trust fee income	1,910		1,835		5,789		5,935
Service charges on deposit accounts	Service charges on deposit accounts	1,547		1,504				Service charges on deposit accounts	1,816		1,522		5,088		4,600
Investment advisory commission and fee income	Investment advisory commission and fee income	4,752		5,152				Investment advisory commission and fee income	4,843		4,199		14,303		14,163
Insurance commission and fee income	Insurance commission and fee income	6,487		5,570				Insurance commission and fee income	4,852		4,442		16,447		14,641
Other service fee income	Other service fee income	3,076		2,756				Other service fee income	3,020		3,124		9,414		9,189
Bank owned life insurance income	Bank owned life insurance income	767		699				Bank owned life insurance income	806		1,153		2,362		2,557
Net gain on sales of investment securities	Net gain on sales of investment securities	—		30				Net gain on sales of investment securities	—		—		—		30
Net gain on mortgage banking activities	Net gain on mortgage banking activities	625		1,929				Net gain on mortgage banking activities	1,216		817		2,880		3,976
Other income	Other income	471		728				Other income	228		867		1,921		2,336
Total noninterest income	Total noninterest income	19,680		20,470				Total noninterest income	18,691		17,959		58,204		57,427
Noninterest expense	Noninterest expense							Noninterest expense
Salaries, benefits and commissions	Salaries, benefits and commissions	31,014		28,245				Salaries, benefits and commissions	29,978		29,400		90,867		86,778
Net occupancy	Net occupancy	2,727		2,716				Net occupancy	2,594		2,504		7,935		7,642
Equipment	Equipment	993		982				Equipment	1,087		968		3,066		2,927
Data processing	Data processing	4,029		3,567				Data processing	4,189		3,901		12,355		11,176
Professional fees	Professional fees	1,941		2,138				Professional fees	1,763		2,521		5,373		7,503
Marketing and advertising	Marketing and advertising	371		425				Marketing and advertising	555		605		1,548		1,723
Deposit insurance premiums	Deposit insurance premiums	1,101		893				Deposit insurance premiums	1,258		662		3,475		2,367
Intangible expenses	Intangible expenses	253		341				Intangible expenses	220		309		726		992

Restructuring charges								Restructuring charges	—		—		1,330		—
Other expense	Other expense	7,100		6,105				Other expense	7,344		5,795		21,641		18,340
Total noninterest expense	Total noninterest expense	49,529		45,412				Total noninterest expense	48,988		46,665		148,316		139,448
Income before income taxes	Income before income taxes	26,081		25,168				Income before income taxes	21,269		25,986		68,286		67,578
Income tax expense	Income tax expense	5,047		4,851				Income tax expense	4,253		5,185		13,436		13,294
Net income	Net income	$	21,034	$	20,317			Net income	$	17,016	$	20,801	$	54,850	$	54,284
Net income per share:	Net income per share:							Net income per share:
Basic	Basic	$	0.72	$	0.69			Basic	$	0.58	$	0.71	$	1.86	$	1.85
Diluted	Diluted	0.71		0.68				Diluted	0.58		0.71		1.86		1.84

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) 2023 2022
Before
Tax
Amount Tax
Expense
(Benefit) Net of
Tax
Amount Before
Tax
Amount Tax
Expense
(Benefit) Net of
Tax
Amount
Income $ 26,081 $ 5,047 $ 21,034 $ 25,168 $ 4,851 $ 20,317
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized holding gains (losses) arising during the period 5,393 1,133 4,260 (20,369) (4,278) (16,091)
Provision for credit losses 292 61 231 346 73 273
Less: reclassification adjustment for net gains on sales realized in net income (1) — — — (30) (6) (24)
Total net unrealized gains (losses) on available-for-sale investment securities 5,685 1,194 4,491 (20,053) (4,211) (15,842)
Net unrealized gains on interest rate swaps used in cash flow hedges:
Net unrealized holding gains arising during the period 1,306 274 1,032 76 16 60
Less: reclassification adjustment for net losses realized in net income (2) 1,060 223 837 68 14 54
Total net unrealized gains on interest rate swaps used in cash flow hedges 2,366 497 1,869 144 30 114
Defined benefit pension plans:
Amortization of net actuarial loss included in net periodic pension costs (3) 246 52 194 218 46 172
Total defined benefit pension plans 246 52 194 218 46 172
Other comprehensive income (loss) 8,297 1,743 6,554 (19,691) (4,135) (15,556)
Total comprehensive income $ 34,378 $ 6,790 $ 27,588 $ 5,477 $ 716 $ 4,761


	Three Months Ended September 30,
(Dollars in thousands)	2023						2022
	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount		Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
Income	$	21,269	$	4,253	$	17,016	$	25,986	$	5,185	$	20,801
Other comprehensive loss:
Net unrealized losses on available-for-sale investment securities:
Net unrealized holding losses arising during the period	(12,622)		(2,651)		(9,971)		(18,093)		(3,800)		(14,293)
Reversal of provision for credit losses	—		—		—		(393)		(82)		(311)


Total net unrealized losses on available-for-sale investment securities	(12,622)		(2,651)		(9,971)		(18,486)		(3,882)		(14,604)
Net unrealized losses on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period	(2,541)		(534)		(2,007)		(9,418)		(1,978)		(7,440)
Less: reclassification adjustment for net losses (gains) realized in net income (1)	1,558		327		1,231		(422)		(89)		(333)
Total net unrealized losses on interest rate swaps used in cash flow hedges	(983)		(207)		(776)		(9,840)		(2,067)		(7,773)
Defined benefit pension plans:

Amortization of net actuarial gains included in net periodic pension costs (2)	247		52		195		219		46		173



Total defined benefit pension plans	247		52		195		219		46		173
Other comprehensive loss	(13,358)		(2,806)		(10,552)		(28,107)		(5,903)		(22,204)
Total comprehensive income (loss)	$	7,911	$	1,447	$	6,464	$	(2,121)	$	(718)	$	(1,403)

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

(2) 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)	2023						2022
	Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount		Before Tax Amount		Tax Expense (Benefit)		Net of Tax Amount
Income	$	68,286	$	13,436	$	54,850	$	67,578	$	13,294	$	54,284
Other comprehensive income (loss):
Net unrealized losses on available-for-sale investment securities:
Net unrealized holding losses arising during the period	(10,411)		(2,186)		(8,225)		(53,798)		(11,298)		(42,500)
Provision for credit losses	397		83		314		370		78		292
Less: reclassification adjustment for net gains on sales realized in net income (1)	—		—		—		(30)		(6)		(24)

Total net unrealized losses on available-for-sale investment securities	(10,014)		(2,103)		(7,911)		(53,458)		(11,226)		(42,232)
Net unrealized losses on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period	(6,716)		(1,411)		(5,305)		(7,716)		(1,621)		(6,095)
Less: reclassification adjustment for net losses (gains) losses realized in net income (2)	3,989		838		3,151		(1,040)		(218)		(822)
Total net unrealized losses on interest rate swaps used in cash flow hedges	(2,727)		(573)		(2,154)		(8,756)		(1,839)		(6,917)
Defined benefit pension plans:

Amortization of net actuarial gains included in net periodic pension costs (3)	739		156		583		655		138		517



Total defined benefit pension plans	739		156		583		655		138		517
Other comprehensive loss	(12,002)		(2,520)		(9,482)		(61,559)		(12,927)		(48,632)
Total comprehensive income	$	56,284	$	10,916	$	45,368	$	6,019	$	367	$	5,652

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

(2) Included in interest expense on demand deposits on the condensed 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

UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)


(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total		(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Three Months Ended March 31, 2023
Balance at December 31, 2022		29,271,915	$	157,784	$	300,808	$	428,637	$	(62,104)	$	(48,625)	$	776,500
Three Months Ended September 30, 2023															Three Months Ended September 30, 2023
Balance at June 30, 2023															Balance at June 30, 2023	29,471,124	$	157,784	$	299,212	$	453,806	$	(61,034)	$	(44,546)	$	805,222
Net income	Net income	—	—		—		21,034		—		—		21,034		Net income	—	—		—		17,016		—		—		17,016
Other comprehensive income, net of income tax		—	—		—		—		6,554		—		6,554
Other comprehensive loss, net of income tax benefit															Other comprehensive loss, net of income tax benefit	—	—		—		—		(10,552)		—		(10,552)
Cash dividends declared ($0.21 per share)	Cash dividends declared ($0.21 per share)	—	—		—		(6,151)		—		—		(6,151)		Cash dividends declared ($0.21 per share)	—	—		—		(6,190)		—		—		(6,190)
Stock-based compensation	Stock-based compensation	—	—		1,057		(27)		—		—		1,030		Stock-based compensation	—	—		1,031		2		—		—		1,033
Stock issued under dividend reinvestment and employee stock purchase plans	Stock issued under dividend reinvestment and employee stock purchase plans	25,344	—		29		—		—		633		662		Stock issued under dividend reinvestment and employee stock purchase plans	36,766	—		(65)		—		—		735		670
Vesting of restricted stock units, net of shares withheld to cover taxes	Vesting of restricted stock units, net of shares withheld to cover taxes	126,270	—		(3,713)		—		—		2,506		(1,207)		Vesting of restricted stock units, net of shares withheld to cover taxes	238	—		(7)		—		—		6		(1)

Exercise of stock options		4,167	—		(14)		—		—		88		74

Balance at March 31, 2023		29,427,696	$	157,784	$	298,167	$	443,493	$	(55,550)	$	(45,398)	$	798,496

Balance at September 30, 2023															Balance at September 30, 2023	29,508,128	$	157,784	$	300,171	$	464,634	$	(71,586)	$	(43,805)	$	807,198


(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total		(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Three Months Ended March 31, 2022
Balance, December 31, 2021		29,500,542	$	157,784	$	299,181	$	375,124	$	(16,353)	$	(41,942)	$	773,794
Three Months Ended September 30, 2022															Three Months Ended September 30, 2022
Balance at June 30, 2022															Balance at June 30, 2022	29,365,775	$	157,784	$	298,800	$	396,295	$	(42,781)	$	(46,173)	$	763,925
Net income	Net income	—	—		—		20,317		—		—		20,317		Net income	—	—		—		20,801		—		—		20,801
Other comprehensive loss, net of income tax benefit	Other comprehensive loss, net of income tax benefit	—	—		—		—		(15,556)		—		(15,556)		Other comprehensive loss, net of income tax benefit	—	—		—		—		(22,204)		—		(22,204)
Cash dividends declared ($0.20 per share)		—	—		—		(5,905)		—		—		(5,905)
Cash dividends declared ($0.21 per share)															Cash dividends declared ($0.21 per share)	—	—		—		(6,153)		—		—		(6,153)
Stock-based compensation	Stock-based compensation	—	—		1,073		(204)		—		—		869		Stock-based compensation	—	—		973		(1)		—		—		972
Stock issued under dividend reinvestment and employee stock purchase plans	Stock issued under dividend reinvestment and employee stock purchase plans	21,843	—		59		—		—		564		623		Stock issued under dividend reinvestment and employee stock purchase plans	26,438	—		25		—		—		634		659
Vesting of restricted stock units, net of shares withheld to cover taxes	Vesting of restricted stock units, net of shares withheld to cover taxes	88,259	—		(2,418)		—		—		1,555		(863)		Vesting of restricted stock units, net of shares withheld to cover taxes	238	—		(7)		—		—		5		(2)

Exercise of stock options		25,781	—		50		—		—		526		576

Balance at March 31, 2022		29,636,425	$	157,784	$	297,945	$	389,332	$	(31,909)	$	(39,297)	$	773,855
Purchases of treasury stock															Purchases of treasury stock	(150,000)	—		—		—		—		(3,811)		(3,811)
Balance at September 30, 2022															Balance at September 30, 2022	29,242,451	$	157,784	$	299,791	$	410,942	$	(64,985)	$	(49,345)	$	754,187


(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, 2023
Balance at December 31, 2022	29,271,915	$	157,784	$	300,808	$	428,637	$	(62,104)	$	(48,625)	$	776,500
Net income	—	—		—		54,850		—		—		54,850
Other comprehensive loss, net of income tax benefit	—	—		—		—		(9,482)		—		(9,482)
Cash dividends declared ($0.63 per share)	—	—		—		(18,521)		—		—		(18,521)
Stock-based compensation	—	—		3,322		(332)		—		—		2,990
Stock issued under dividend reinvestment and employee stock purchase plans	98,402	—		(84)		—		—		2,063		1,979
Vesting of restricted stock units, net of shares withheld to cover taxes	131,601	—		(3,857)		—		—		2,625		(1,232)

Exercise of stock options	6,210	—		(18)		—		—		132		114


Balance at September 30, 2023	29,508,128	$	157,784	$	300,171	$	464,634	$	(71,586)	$	(43,805)	$	807,198

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(Dollars in thousands, except per share data)	Common Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Total
Nine Months Ended September 30, 2022
Balance at December 31, 2021	29,500,542	$	157,784	$	299,181	$	375,124	$	(16,353)	$	(41,942)	$	773,794
Net income	—	—		—		54,284		—		—		54,284
Other comprehensive loss, net of income tax benefit	—	—		—		—		(48,632)		—		(48,632)
Cash dividends declared ($0.62 per share)	—	—		—		(18,258)		—		—		(18,258)
Stock-based compensation	—	—		2,982		(208)		—		—		2,774
Stock issued under dividend reinvestment and employee stock purchase plans	74,055	—		129		—		—		1,805		1,934
Vesting of restricted stock units, net of shares withheld to cover taxes	92,073	—		(2,551)		—		—		1,648		(903)

Exercise of stock options	25,781	—		50		—		—		525		575

Purchases of treasury stock	(450,000)	—		—		—		—		(11,381)		(11,381)
Balance at September 30, 2022	29,242,451	$	157,784	$	299,791	$	410,942	$	(64,985)	$	(49,345)	$	754,187

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

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UNIVEST FINANCIAL CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Three Months Ended March 31,					Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2023		2022		(Dollars in thousands)	2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	21,034	$	20,317	Net income	$	54,850	$	54,284
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Provision (reversal of provision) for credit losses		3,387		(3,450)
Provision for credit losses						Provision for credit losses	8,839		6,782
Depreciation of premises and equipment	Depreciation of premises and equipment	1,181		1,101		Depreciation of premises and equipment	3,752		3,323
Net amortization of investment securities premiums and discounts	Net amortization of investment securities premiums and discounts	264		472		Net amortization of investment securities premiums and discounts	873		1,168
Net gain on sales of investment securities	Net gain on sales of investment securities	—		(30)		Net gain on sales of investment securities	—		(30)
Net gain on mortgage banking activities	Net gain on mortgage banking activities	(625)		(1,929)		Net gain on mortgage banking activities	(2,880)		(3,976)

Bank owned life insurance income	Bank owned life insurance income	(767)		(699)		Bank owned life insurance income	(2,362)		(2,557)
Stock-based compensation	Stock-based compensation	1,110		934		Stock-based compensation	3,229		2,998
Intangible expenses	Intangible expenses	253		341		Intangible expenses	726		992
Other adjustments to reconcile net income to cash used in operating activities	Other adjustments to reconcile net income to cash used in operating activities	(32)		(910)		Other adjustments to reconcile net income to cash used in operating activities	(1,455)		(2,896)

Originations of loans held for sale	Originations of loans held for sale	(28,043)		(73,541)		Originations of loans held for sale	(165,076)		(198,547)
Proceeds from the sale of loans held for sale	Proceeds from the sale of loans held for sale	28,430		82,616		Proceeds from the sale of loans held for sale	162,728		215,424
Contributions to pension and other postretirement benefit plans	Contributions to pension and other postretirement benefit plans	(62)		(63)		Contributions to pension and other postretirement benefit plans	(186)		(189)
(Increase) decrease in accrued interest receivable and other assets	(Increase) decrease in accrued interest receivable and other assets	(1,878)		4,316		(Increase) decrease in accrued interest receivable and other assets	(8,200)		2,252
Decrease in accrued interest payable and other liabilities		(3,512)		(5,535)
Increase in accrued interest payable and other liabilities						Increase in accrued interest payable and other liabilities	7,029		4,449
Net cash provided by operating activities	Net cash provided by operating activities	20,740		23,940		Net cash provided by operating activities	61,867		83,477
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:

Proceeds from sale of premises and equipment	Proceeds from sale of premises and equipment	5		6,170		Proceeds from sale of premises and equipment	1,032		6,844
Purchases of premises and equipment	Purchases of premises and equipment	(2,590)		(676)		Purchases of premises and equipment	(5,220)		(3,673)
Proceeds from maturities, calls and principal repayments of securities held-to-maturity	Proceeds from maturities, calls and principal repayments of securities held-to-maturity	3,284		14,335		Proceeds from maturities, calls and principal repayments of securities held-to-maturity	11,225		27,700
Proceeds from maturities, calls and principal repayments of securities available-for-sale	Proceeds from maturities, calls and principal repayments of securities available-for-sale	6,940		8,501		Proceeds from maturities, calls and principal repayments of securities available-for-sale	24,052		25,132
Proceeds from sales of securities available-for-sale	Proceeds from sales of securities available-for-sale	—		1,530		Proceeds from sales of securities available-for-sale	—		1,530
Purchases of investment securities held-to-maturity	Purchases of investment securities held-to-maturity	—		(3,936)		Purchases of investment securities held-to-maturity	(6,253)		(10,427)
Purchases of investment securities available-for-sale	Purchases of investment securities available-for-sale	(19,129)		(63,634)		Purchases of investment securities available-for-sale	(19,348)		(111,611)
Proceeds from sales of money market mutual funds	Proceeds from sales of money market mutual funds	10		2,508		Proceeds from sales of money market mutual funds	252		3,506
Purchases of money market mutual funds	Purchases of money market mutual funds	(605)		(2,077)		Purchases of money market mutual funds	(1,845)		(3,708)
Net (increase) decrease in other investments		(9,951)		1,856
Net increase in other investments						Net increase in other investments	(8,576)		(1,289)
Proceeds from sale of loans originally held-for-investment	Proceeds from sale of loans originally held-for-investment	175		—		Proceeds from sale of loans originally held-for-investment	19,631		2,500

Net increase in loans and leases	Net increase in loans and leases	(119,332)		(90,783)		Net increase in loans and leases	(481,200)		(562,235)
Proceeds from sales of other real estate owned	Proceeds from sales of other real estate owned	260		—		Proceeds from sales of other real estate owned	260		—

Purchases of bank owned life insurance	Purchases of bank owned life insurance	(7,862)		—		Purchases of bank owned life insurance	(7,862)		—

Proceeds from bank owned life insurance						Proceeds from bank owned life insurance	—		1,221
Net cash used in investing activities	Net cash used in investing activities	(148,795)		(126,206)		Net cash used in investing activities	(473,852)		(624,510)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net decrease in deposits		(78,876)		(7,200)
Net increase (decrease) in short-term borrowings		74,740		(1,130)
Net increase (decrease) in deposits						Net increase (decrease) in deposits	525,619		(268,171)
Net (decrease) increase in short-term borrowings						Net (decrease) increase in short-term borrowings	(182,465)		60,605
Proceeds from issuance of long-term debt	Proceeds from issuance of long-term debt	150,000		—		Proceeds from issuance of long-term debt	250,000		—
Repayment of long-term debt	Repayment of long-term debt	(25,000)		—		Repayment of long-term debt	(25,000)		—

Payment of contingent consideration on acquisitions	Payment of contingent consideration on acquisitions	(635)		—		Payment of contingent consideration on acquisitions	(635)		—

Payment for shares withheld to cover taxes on vesting of restricted stock units	Payment for shares withheld to cover taxes on vesting of restricted stock units	(1,207)		(863)		Payment for shares withheld to cover taxes on vesting of restricted stock units	(1,232)		(903)

Purchases of treasury stock						Purchases of treasury stock	—		(11,381)
Stock issued under dividend reinvestment and employee stock purchase plans	Stock issued under dividend reinvestment and employee stock purchase plans	662		623		Stock issued under dividend reinvestment and employee stock purchase plans	1,979		1,934
Proceeds from exercise of stock options	Proceeds from exercise of stock options	74		576		Proceeds from exercise of stock options	114		575
Cash dividends paid	Cash dividends paid	(6,178)		(6,109)		Cash dividends paid	(18,853)		(18,466)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	113,580		(14,103)		Net cash provided by (used in) financing activities	549,527		(235,807)
Net decrease in cash and cash equivalents		(14,475)		(116,369)
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	137,542		(776,840)
Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	152,799		890,150		Cash and cash equivalents at beginning of year	152,799		890,150
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	138,324	$	773,781	Cash and cash equivalents at end of period	$	290,341	$	113,310

Supplemental disclosures of cash flow information:
Cash paid for interest		$	21,927	$	5,559
Cash paid for income taxes, net of refunds		65		28
Non cash transactions:

Transfer of loans to loans held for sale		$	175	$	—

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	Nine Months Ended September 30,
(Dollars in thousands)	2023		2022
Supplemental disclosures of cash flow information:
Cash paid for interest	$	93,435	$	20,095
Cash paid for income taxes, net of refunds	13,232		6,629
Non cash transactions:
Transfer of loans to other real estate owned	$	79	$	18,325
Transfer of loans to loans held for sale	25,646		2,500

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

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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 the rules and regulations for interim financial information. The accompanying unaudited consolidated financial statements reflect all adjustments, which are of a normal recurring nature and are, in the opinion of management, necessary for a fair presentation of the financial statements for the interim periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation. Operating results for the three-month or nine-month period ended ~~March 31,~~September 30, 2023 are not necessarily indicative of the results that may be expected for the year ended December 31, 2023 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 Corporation’s Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 24, 2023.

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 the fair value measurement of investment securities available-for-sale and the determination of the allowance for credit losses.

Modified Loans

A loan is classified as a modified loan to a borrower experiencing financial difficulty when a contractual loan modification in the form of principal forgiveness, an interest rate reduction, an other-than-significant payment delay or a term extension (or a combination thereof) has been granted to an existing borrower experiencing financial difficulties. The goal when modifying a credit is to ~~establish a reasonable period of time to~~ provide ~~cash flow~~ relief to customers experiencing cash flow difficulties. Accruing modified loans to borrowers experiencing financial difficulty are primarily comprised of loans on which interest is being accrued under the modified terms, and the loans are current or less than 90 days past due.

Loans and Leases - Prior to ASU No. 2022-02 Adoption

The Corporation adopted ASU No. 2022-02 effective January 1, 2023. The following section was carried forward from the Annual Report of Form 10-K for the year ended December 31, 2022.

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

Accounting Pronouncements Adopted in 2023

In March 2022, the FASB issued ASU No. 2022-02, "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures." The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted CECL and enhance the disclosure requirements for modifications of receivables made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current period gross write-offs by year of origination for financing receivables and net investment in leases in the existing vintage disclosures. This ASU became

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effective on January 1, 2023 for the Corporation. The adoption of this ASU resulted in updated disclosures within our financial statements but otherwise did not have a material impact on the Corporation's financial statements.

Recent Accounting Pronouncements Yet to Be Adopted

In March 2023, the FASB issued ASU No. 2023-02, "Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force)". ~~The~~This ASU allows entities to elect the proportional amortization method, on a tax-credit-program-by-tax-credit-program basis, for all equity investments in tax credit programs meeting the eligibility criteria in Accounting Standards Codification (ASC) 323-740-25-1. While the ASU does not significantly alter the existing eligibility criteria, it does provide clarifications to address existing interpretive issues. It also prescribes specific information reporting entities must disclose about tax credit investments each period. This ASU is effective for reporting periods beginning after December 15, 2023, for public business entities, or January 1, 2024 for the Corporation. The Corporation does not expect the adoption of this ASU to have a material impact on the Corporation's financial statements.

In July 2023, the FASB issued ASU No. 2023-03, "Presentation Of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities From Equity (Topic 480), Equity (Topic 505), And Compensation—Stock Compensation (Topic 718)". The ASU amends or supersedes various SEC paragraphs within the codification to conform to past SEC announcements and guidance issued by the SEC. The ASU does not provide new guidance and therefore there is no transition or effective date for implementation.

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, 2022.


		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)	2023		2022			(Dollars and shares in thousands, except per share data)	2023		2022		2023		2022
Numerator for basic and diluted earnings per share—net income available to common shareholders	Numerator for basic and diluted earnings per share—net income available to common shareholders	$	21,034	$	20,317		Numerator for basic and diluted earnings per share—net income available to common shareholders	$	17,016	$	20,801	$	54,850	$	54,284
Denominator for basic earnings per share—weighted-average shares outstanding	Denominator for basic earnings per share—weighted-average shares outstanding	29,312		29,542			Denominator for basic earnings per share—weighted-average shares outstanding	29,479		29,291		29,411		29,440
Effect of dilutive securities—employee stock options and restricted stock units		194		196
Effect of dilutive securities—stock options and restricted stock units							Effect of dilutive securities—stock options and restricted stock units	79		141		95		148
Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	29,506		29,738			Denominator for diluted earnings per share—adjusted weighted-average shares outstanding	29,558		29,432		29,506		29,588
Basic earnings per share	Basic earnings per share	$	0.72	$	0.69		Basic earnings per share	$	0.58	$	0.71	$	1.86	$	1.85
Diluted earnings per share	Diluted earnings per share	$	0.71	$	0.68		Diluted earnings per share	$	0.58	$	0.71	$	1.86	$	1.84
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	229		249			Average antidilutive options and restricted stock units excluded from computation of diluted earnings per share	540		250		432		250

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Note 3. Investment Securities

The following table shows the amortized cost, the estimated fair value and the allowance for credit losses of the held-to-maturity securities and available-for-sale securities at ~~March 31,~~September 30, 2023 and December 31, 2022, by contractual maturity within each type:


		At March 31, 2023											At September 30, 2023
(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

Residential mortgage-backed securities:	Residential mortgage-backed securities:											Residential mortgage-backed securities:
After 1 year to 5 years	After 1 year to 5 years	$	2,554	$	—	$	(87)			$	2,467	After 1 year to 5 years	$	2,077	$	—	$	(95)	$	—	$	1,982
After 5 years to 10 years	After 5 years to 10 years	7,531		—		(398)		—		7,133		After 5 years to 10 years	10,100		—		(763)		—		9,337
Over 10 years	Over 10 years	141,262		—		(17,715)		—		123,547		Over 10 years	137,274		—		(24,833)		—		112,441
		151,347		—		(18,200)		—		133,147			149,451		—		(25,691)		—		123,760

Total	Total	$	151,347	$	—	$	(18,200)	$	—	$	133,147	Total	$	149,451	$	—	$	(25,691)	$	—	$	123,760
Securities Available-for-Sale	Securities Available-for-Sale											Securities Available-for-Sale

State and political subdivisions:	State and political subdivisions:											State and political subdivisions:
Within 1 year	Within 1 year	$	1,030	$	1	$	—	$	—	$	1,031	Within 1 year	$	1,030	$	—	$	(5)	$	—	$	1,025
After 1 year to 5 years	After 1 year to 5 years	1,297		—		(31)		—		1,266		After 1 year to 5 years	1,298		—		(56)		—		1,242

		2,327		1		(31)		—		2,297			2,328		—		(61)		—		2,267
Residential mortgage-backed securities:	Residential mortgage-backed securities:											Residential mortgage-backed securities:

After 1 year to 5 years	After 1 year to 5 years	784		—		(29)		—		755		After 1 year to 5 years	632		—		(27)		—		605
After 5 years to 10 years	After 5 years to 10 years	15,617		—		(1,194)		—		14,423		After 5 years to 10 years	14,257		—		(1,818)		—		12,439
Over 10 years	Over 10 years	301,712		32		(36,128)		—		265,616		Over 10 years	286,909		—		(50,788)		—		236,121
		318,113		32		(37,351)		—		280,794			301,798		—		(52,633)		—		249,165
Collateralized mortgage obligations:	Collateralized mortgage obligations:											Collateralized mortgage obligations:

After 5 years to 10 years	After 5 years to 10 years	305		—		(18)		—		287		After 5 years to 10 years	262		—		(16)		—		246
Over 10 years	Over 10 years	2,199		—		(215)		—		1,984		Over 10 years	2,030		—		(242)		—		1,788
		2,504		—		(233)		—		2,271			2,292		—		(258)		—		2,034
Corporate bonds:	Corporate bonds:											Corporate bonds:
Within 1 year	Within 1 year	1,500		—		(1)		(1)		1,498		Within 1 year	16,518		—		(147)		(117)		16,254
After 1 year to 5 years	After 1 year to 5 years	29,674		4		(1,163)		(200)		28,315		After 1 year to 5 years	13,868		—		(987)		(74)		12,807
After 5 years to 10 years	After 5 years to 10 years	60,000		—		(6,288)		(1,231)		52,481		After 5 years to 10 years	60,000		—		(6,643)		(1,346)		52,011

		91,174		4		(7,452)		(1,432)		82,294			90,386		—		(7,777)		(1,537)		81,072
Total	Total	$	414,118	$	37	$	(45,067)	$	(1,432)	$	367,656	Total	$	396,804	$	—	$	(60,729)	$	(1,537)	$	334,538

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	At December 31, 2022
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Securities Held-to-Maturity




Residential mortgage-backed securities:
After 1 year to 5 years	$	1,654	$	—	$	(70)	$	—	$	1,584
After 5 years to 10 years	6,076		—		(342)		—		5,734
Over 10 years	146,997		—		(20,247)		—		126,750
	154,727		—		(20,659)		—		134,068




Total	$	154,727	$	—	$	(20,659)	$	—	$	134,068
Securities Available-for-Sale









State and political subdivisions:

After 1 year to 5 years	$	2,327	$	—	$	(42)	$	—	$	2,285


	2,327		—		(42)		—		2,285
Residential mortgage-backed securities:

After 1 year to 5 years	864		—		(37)		—		827
After 5 years to 10 years	10,399		—		(815)		—		9,584
Over 10 years	294,261		7		(41,291)		—		252,977
	305,524		7		(42,143)		—		263,388
Collateralized mortgage obligations:

After 5 years to 10 years	324		—		(22)		—		302
Over 10 years	2,257		—		(237)		—		2,020
	2,581		—		(259)		—		2,322
Corporate bonds:
Within 1 year	1,000		—		—		—		1,000
After 1 year to 5 years	30,679		3		(1,516)		(152)		29,014
After 5 years to 10 years	60,000		—		(6,765)		(988)		52,247

	91,679		3		(8,281)		(1,140)		82,261
Total	$	402,111	$	10	$	(50,725)	$	(1,140)	$	350,256

Gross unrealized gains and losses on available-for-sale securities are recognized in accumulated other comprehensive income (loss) and changes in the allowance for credit loss are recorded in provision for credit loss expense. 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 ~~$327.8~~$413.2 million and $429.4 million at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, were pledged to secure public funds deposits and ~~other contractual obligations.~~contingency funding. There were no pledged securities to secure credit derivatives and interest rate swaps at ~~March 31,~~September 30, 2023 or December 31, 2022. 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, 2023 and 2022:


		Three Months Ended March 31,					Nine Months Ended September 30,
(Dollars in thousands)	(Dollars in thousands)	2023		2022		(Dollars in thousands)	2023		2022
Securities available-for-sale:	Securities available-for-sale:					Securities available-for-sale:
Proceeds from sales	Proceeds from sales	$	—	$	1,530	Proceeds from sales	$	—	$	1,530
Gross realized gains on sales	Gross realized gains on sales	—		30		Gross realized gains on sales	—		30

Tax expense related to net realized gains on sales	Tax expense related to net realized gains on sales	—		6		Tax expense related to net realized gains on sales	—		6

At ~~March 31,~~September 30, 2023 and December 31, 2022, there were no reportable investments in any single issuer representing more than 10% of shareholders’ equity.

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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, 2023 and December 31, 2022, 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, 2023
At September 30, 2023														At September 30, 2023
Securities Held-to-Maturity	Securities Held-to-Maturity													Securities Held-to-Maturity

Residential mortgage-backed securities	Residential mortgage-backed securities	$	22,966	$	(862)	$	110,181	$	(17,338)	$	133,147	$	(18,200)	Residential mortgage-backed securities	$	5,771	$	(350)	$	117,989	$	(25,341)	$	123,760	$	(25,691)

Total	Total	$	22,966	$	(862)	$	110,181	$	(17,338)	$	133,147	$	(18,200)	Total	$	5,771	$	(350)	$	117,989	$	(25,341)	$	123,760	$	(25,691)
Securities Available-for-Sale	Securities Available-for-Sale													Securities Available-for-Sale

State and political subdivisions	State and political subdivisions	$	—	$	—	$	1,267	$	(31)	$	1,267	$	(31)	State and political subdivisions	$	—	$	—	$	1,242	$	(56)	$	1,242	$	(56)
Residential mortgage-backed securities	Residential mortgage-backed securities	84,540		(4,885)		190,747		(32,466)		275,287		(37,351)		Residential mortgage-backed securities	21,292		(942)		227,657		(51,691)		248,949		(52,633)
Collateralized mortgage obligations	Collateralized mortgage obligations	—		—		2,271		(233)		2,271		(233)		Collateralized mortgage obligations	—		—		2,034		(258)		2,034		(258)

Corporate bonds														Corporate bonds	—		—		280		(1)		280		(1)
Total	Total	$	84,540	$	(4,885)	$	194,285	$	(32,730)	$	278,825	$	(37,615)	Total	$	21,292	$	(942)	$	231,213	$	(52,006)	$	252,505	$	(52,948)
At December 31, 2022	At December 31, 2022													At December 31, 2022
Securities Held-to-Maturity	Securities Held-to-Maturity													Securities Held-to-Maturity

Residential mortgage-backed securities	Residential mortgage-backed securities	$	65,044	$	(5,894)	$	69,024	$	(14,765)	$	134,068	$	(20,659)	Residential mortgage-backed securities	$	65,044	$	(5,894)	$	69,024	$	(14,765)	$	134,068	$	(20,659)

Total	Total	$	65,044	$	(5,894)	$	69,024	$	(14,765)	$	134,068	$	(20,659)	Total	$	65,044	$	(5,894)	$	69,024	$	(14,765)	$	134,068	$	(20,659)
Securities Available-for-Sale	Securities Available-for-Sale													Securities Available-for-Sale

State and political subdivisions	State and political subdivisions	$	1,255	$	(42)	$	—	$	—	$	1,255	$	(42)	State and political subdivisions	$	1,255	$	(42)	$	—	$	—	$	1,255	$	(42)
Residential mortgage-backed securities	Residential mortgage-backed securities	128,831		(13,843)		133,902		(28,300)		262,733		(42,143)		Residential mortgage-backed securities	128,831		(13,843)		133,902		(28,300)		262,733		(42,143)
Collateralized mortgage obligations	Collateralized mortgage obligations	302		(22)		2,020		(237)		2,322		(259)		Collateralized mortgage obligations	302		(22)		2,020		(237)		2,322		(259)
Corporate bonds	Corporate bonds	500		(1)		—		—		500		(1)		Corporate bonds	500		(1)		—		—		500		(1)
Total	Total	$	130,888	$	(13,908)	$	135,922	$	(28,537)	$	266,810	$	(42,445)	Total	$	130,888	$	(13,908)	$	135,922	$	(28,537)	$	266,810	$	(42,445)

At ~~March 31,~~September 30, 2023, 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 ~~$133.1~~$123.8 million, including unrealized losses of ~~$18.2~~$25.7 million. These holdings were comprised of 8488 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, 2023.

At ~~March 31,~~September 30, 2023, 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 ~~$278.8~~$252.5 million, including unrealized losses of ~~$37.6~~$52.9 million. These holdings were comprised of (1) ~~109~~112 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, (2) two collateralized mortgage obligation bonds, (3) two investment grade corporate bonds, and (4) one state and political ~~subdivisions bond and (4) one investment grade corporate~~subdivision bond. 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 $1.2 million at ~~March 31,~~September 30, 2023 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.

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The table below presents a rollforward by major security type for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and ~~March 31,~~September 30, 2022 of the allowance for credit losses on securities available-for-sale.


(Dollars in thousands)	Corporate Bonds
~~Three~~Nine months ended ~~March 31,~~September 30, 2023
Securities Available-for-Sale
Beginning balance	$	(1,140)
Additions for securities for which no previous expected credit losses were recognized	(2)
Change in securities for which a previous expected credit loss was recognized	~~(292)~~(395)
Ending balance	$	~~(1,432)~~(1,537)
~~Three~~Nine months ended ~~March 31,~~September 30, 2022
Securities Available-for-Sale
Beginning balance	$	(929)
Additions for securities for which no previous expected credit losses were recognized	~~(45)~~(153)
Change in securities for which a previous expected credit loss was recognized	~~(301)~~(217)
Ending balance	$	~~(1,275)~~(1,299)

At ~~March 31,~~September 30, 2023, the fair value of available-for-sale securities in an unrealized loss position for which an allowance for credit losses has been recorded was ~~$81.3~~$81.8 million, including unrealized losses of $8.9 million, and allowance for credit losses of ~~$1.4~~$1.5 million. These holdings were comprised of 39 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 Corporation recognized a ~~$69~~$118 thousand and a $207 thousand net loss ~~and a $1 thousand net gain~~ on equity securities during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively, in other noninterest income. There were no sales of equity securities during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 or 2022.

Note 4. Loans and Leases

Summary of Major Loan and Lease Categories


(Dollars in thousands)	(Dollars in thousands)	At March 31, 2023		At December 31, 2022		(Dollars in thousands)	At September 30, 2023		At December 31, 2022
Commercial, financial and agricultural	Commercial, financial and agricultural	$	1,032,753	$	1,088,928	Commercial, financial and agricultural	$	1,050,004	$	1,088,928
Real estate-commercial	Real estate-commercial	3,128,210		3,027,955		Real estate-commercial	3,275,140		3,027,955
Real estate-construction	Real estate-construction	376,569		381,811		Real estate-construction	427,561		381,811
Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	498,505		478,254		Real estate-residential secured for business purpose	516,471		478,254
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	779,557		730,395		Real estate-residential secured for personal purpose	861,122		730,395
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	172,073		176,699		Real estate-home equity secured for personal purpose	176,855		176,699
Loans to individuals	Loans to individuals	28,656		27,873		Loans to individuals	27,331		27,873
Lease financings	Lease financings	223,481		211,315		Lease financings	240,474		211,315
Total loans and leases held for investment, net of deferred income	Total loans and leases held for investment, net of deferred income	$	6,239,804	$	6,123,230	Total loans and leases held for investment, net of deferred income	$	6,574,958	$	6,123,230
Less: Allowance for credit losses, loans and leases	Less: Allowance for credit losses, loans and leases	(80,034)		(79,004)		Less: Allowance for credit losses, loans and leases	(83,837)		(79,004)
Net loans and leases held for investment	Net loans and leases held for investment	$	6,159,770	$	6,044,226	Net loans and leases held for investment	$	6,491,121	$	6,044,226
Imputed interest on lease financings, included in the above table	Imputed interest on lease financings, included in the above table	$	(24,386)	$	(21,932)	Imputed interest on lease financings, included in the above table	$	(28,625)	$	(21,932)
Net deferred costs, included in the above table	Net deferred costs, included in the above table	6,633		6,053		Net deferred costs, included in the above table	7,568		6,053
Overdraft deposits included in the above table	Overdraft deposits included in the above table	154		93		Overdraft deposits included in the above table	97		93

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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, 2023 and December 31, 2022:


		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, 2023
At September 30, 2023																		At September 30, 2023
Commercial, financial and agricultural	Commercial, financial and agricultural	$	1,348	$	—	$	—	$	1,348	$	1,027,982	$	1,029,330	$	3,423	$	1,032,753	Commercial, financial and agricultural	$	9,134	$	249	$	1,733	$	11,116	$	1,037,477	$	1,048,593	$	1,411	$	1,050,004
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	328		—		1,195		1,523		3,122,399		3,123,922		4,288		3,128,210		Commercial real estate	5,548		335		220		6,103		3,264,174		3,270,277		4,863		3,275,140
Construction	Construction	—		—		—		—		376,186		376,186		383		376,569		Construction	9,450		—		—		9,450		418,111		427,561		—		427,561
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	308		768		—		1,076		496,670		497,746		759		498,505		Residential secured for business purpose	2,155		650		—		2,805		512,730		515,535		936		516,471
Residential secured for personal purpose	Residential secured for personal purpose	1,506		—		—		1,506		776,551		778,057		1,500		779,557		Residential secured for personal purpose	4,042		41		—		4,083		852,793		856,876		4,246		861,122
Home equity secured for personal purpose	Home equity secured for personal purpose	835		74		—		909		170,216		171,125		948		172,073		Home equity secured for personal purpose	445		251		—		696		175,406		176,102		753		176,855
Loans to individuals	Loans to individuals	20		4		47		71		28,585		28,656		—		28,656		Loans to individuals	175		25		26		226		27,105		27,331		—		27,331
Lease financings	Lease financings	1,207		371		754		2,332		221,088		223,420		61		223,481		Lease financings	854		784		156		1,794		238,623		240,417		57		240,474
Total	Total	$	5,552	$	1,217	$	1,996	$	8,765	$	6,219,677	$	6,228,442	$	11,362	$	6,239,804	Total	$	31,803	$	2,335	$	2,135	$	36,273	$	6,526,419	$	6,562,692	$	12,266	$	6,574,958


	Accruing Loans and Leases
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Total Accruing Loans and Leases		Nonaccrual Loans and Leases		Total Loans and Leases Held for Investment
At December 31, 2022
Commercial, financial and agricultural	$	1,616	$	343	$	—	$	1,959	$	1,081,897	$	1,083,856	$	5,072	$	1,088,928
Real estate—commercial real estate and construction:
Commercial real estate	3,281		290		20		3,591		3,019,827		3,023,418		4,537		3,027,955
Construction	315		—		—		315		381,496		381,811		—		381,811
Real estate—residential and home equity:
Residential secured for business purpose	375		203		263		841		476,400		477,241		1,013		478,254
Residential secured for personal purpose	4,127		162		319		4,608		723,798		728,406		1,989		730,395
Home equity secured for personal purpose	953		225		—		1,178		174,781		175,959		740		176,699
Loans to individuals	32		153		39		224		27,649		27,873		—		27,873
Lease financings	3,555		341		234		4,130		207,183		211,313		2		211,315
Total	$	14,254	$	1,717	$	875	$	16,846	$	6,093,031	$	6,109,877	$	13,353	$	6,123,230

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Table of Contents

Nonperforming Loans and Leases

The following presents, by class of loans and leases, nonperforming loans and leases at ~~March 31,~~September 30, 2023 and December 31, 2022.


		At March 31, 2023						At December 31, 2022							At September 30, 2023						At December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Nonaccrual Loans and Leases		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases		Nonaccrual Loans and Leases		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases		(Dollars in thousands)	Nonaccrual Loans and Leases		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases		Nonaccrual Loans and Leases		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Nonperforming Loans and Leases

Loans held for sale *														Loans held for sale *	$	5,819	$	—	$	5,819	$	—	$	—	$	—
Loans and leases held for investment:														Loans and leases held for investment:
Commercial, financial and agricultural	Commercial, financial and agricultural	$	3,423	$	—	$	3,423	$	5,072	$	—	$	5,072	Commercial, financial and agricultural	$	1,411	$	1,733	$	3,144	$	5,072	$	—	$	5,072
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	4,288		1,195		5,483		4,537		20		4,557		Commercial real estate	4,863		220		5,083		4,537		20		4,557
Construction		383		—		383		—		—		—

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	759		—		759		1,013		263		1,276		Residential secured for business purpose	936		—		936		1,013		263		1,276
Residential secured for personal purpose	Residential secured for personal purpose	1,500		—		1,500		1,989		319		2,308		Residential secured for personal purpose	4,246		—		4,246		1,989		319		2,308
Home equity secured for personal purpose	Home equity secured for personal purpose	948		—		948		740		—		740		Home equity secured for personal purpose	753		—		753		740		—		740
Loans to individuals	Loans to individuals	—		47		47		—		39		39		Loans to individuals	—		26		26		—		39		39
Lease financings	Lease financings	61		754		815		2		234		236		Lease financings	57		156		213		2		234		236
Total	Total	$	11,362	$	1,996	$	13,358	$	13,353	$	875	$	14,228	Total	$	18,085	$	2,135	$	20,220	$	13,353	$	875	$	14,228

*Includes one construction loan at September 30, 2023.

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, 2023 and December 31, 2022.


(Dollars in thousands)	(Dollars in thousands)	Nonaccrual With No ACL		Nonaccrual With ACL		Total Nonaccrual		Loans and Leases 90 Days or more Past Due and Accruing Interest		(Dollars in thousands)	Nonaccrual With No Allowance for Credit Losses		Nonaccrual With Allowance for Credit Losses		Total Nonaccrual		Loans and Leases 90 Days or more Past Due and Accruing Interest
At March 31, 2023
At September 30, 2023										At September 30, 2023
Commercial, financial and agricultural	Commercial, financial and agricultural	$	159	$	3,264	$	3,423	$	—	Commercial, financial and agricultural	$	297	$	1,114	$	1,411	$	1,733
Real estate-commercial	Real estate-commercial	4,288		—		4,288		1,195		Real estate-commercial	4,841		22		4,863		220
Real estate-construction		383		—		383		—

Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	759		—		759		—		Real estate-residential secured for business purpose	936		—		936		—
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	1,500		—		1,500		—		Real estate-residential secured for personal purpose	4,246		—		4,246		—
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	948		—		948		—		Real estate-home equity secured for personal purpose	753		—		753		—
Loans to individuals	Loans to individuals	—		—		—		47		Loans to individuals	—		—		—		26
Lease financings	Lease financings	—		61		61		754		Lease financings	—		57		57		156
Total	Total	$	8,037	$	3,325	$	11,362	$	1,996	Total	$	11,073	$	1,193	$	12,266	$	2,135
At December 31, 2022	At December 31, 2022									At December 31, 2022
Commercial, financial and agricultural	Commercial, financial and agricultural	$	225	$	4,847	$	5,072	$	—	Commercial, financial and agricultural	$	225	$	4,847	$	5,072	$	—
Real estate-commercial	Real estate-commercial	4,537		—		4,537		20		Real estate-commercial	4,537		—		4,537		20

Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	1,013		—		1,013		263		Real estate-residential secured for business purpose	1,013		—		1,013		263
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	1,989		—		1,989		319		Real estate-residential secured for personal purpose	1,989		—		1,989		319
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	740		—		740		—		Real estate-home equity secured for personal purpose	740		—		740		—
Loans to individuals	Loans to individuals	—		—		—		39		Loans to individuals	—		—		—		39
Lease financings	Lease financings	—		2		2		234		Lease financings	—		2		2		234
Total	Total	$	8,504	$	4,849	$	13,353	$	875	Total	$	8,504	$	4,849	$	13,353	$	875

For the ~~three~~nine months ended ~~March 31,~~September 30, 2023, $6$70 thousand of interest income was recognized on nonaccrual loans and leases.

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The following table presents, by class of loans and leases, the amortized cost basis of collateral-dependent nonaccrual loans and leases and type of collateral as of ~~March 31,~~September 30, 2023 and December 31, 2022.


(Dollars in thousands)	(Dollars in thousands)	Real Estate		Other (1)		None (2)		Total		(Dollars in thousands)	Real Estate		Other (1)		None		Total
At March 31, 2023
At September 30, 2023										At September 30, 2023
Commercial, financial and agricultural	Commercial, financial and agricultural	$	3,423	$	—	$	—	$	3,423	Commercial, financial and agricultural	$	1,362	$	49	$	—	$	1,411
Real estate-commercial	Real estate-commercial	4,288		—		—		4,288		Real estate-commercial	4,863		—		—		4,863
Real estate-construction		383		—		—		383

Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	759		—		—		759		Real estate-residential secured for business purpose	936		—		—		936
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	1,500		—		—		1,500		Real estate-residential secured for personal purpose	4,246		—		—		4,246
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	948		—		—		948		Real estate-home equity secured for personal purpose	753		—		—		753

Lease financings	Lease financings	—		61		—		61		Lease financings	—		57		—		57
Total	Total	$	11,301	$	61	$	—	$	11,362	Total	$	12,160	$	106	$	—	$	12,266

(Dollars in thousands)	(Dollars in thousands)	Real Estate		Other (1)		None (2)		Total		(Dollars in thousands)	Real Estate		Other (1)		None (2)		Total
At December 31, 2022	At December 31, 2022									At December 31, 2022
Commercial, financial and agricultural	Commercial, financial and agricultural	$	2,743	$	—	$	2,329	$	5,072	Commercial, financial and agricultural	$	2,743	$	—	$	2,329	$	5,072
Real estate-commercial	Real estate-commercial	4,537		—		—		4,537		Real estate-commercial	4,537		—		—		4,537

Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	1,013		—		—		1,013		Real estate-residential secured for business purpose	1,013		—		—		1,013
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	1,989		—		—		1,989		Real estate-residential secured for personal purpose	1,989		—		—		1,989
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	740		—		—		740		Real estate-home equity secured for personal purpose	740		—		—		740

Lease financings	Lease financings	—		2		—		2		Lease financings	—		2		—		2
Total	Total	$	11,022	$	2	$	2,329	$	13,353	Total	$	11,022	$	2	$	2,329	$	13,353

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

(2) Loans fully guaranteed by the SBA or 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 key risk indicators on at least an annual basis and last completed this review in conjunction with the period ended December 31, 2022. 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, 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

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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, 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, 2023 and December 31, 2022.


		Term Loans Amortized Cost Basis by Origination Year																			Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total		(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
At March 31, 2023
At September 30, 2023																				At September 30, 2023
Commercial, Financial and Agricultural	Commercial, Financial and Agricultural																			Commercial, Financial and Agricultural
Risk Rating	Risk Rating																			Risk Rating
1. Pass	1. Pass	$	27,521	$	194,140	$	145,736	$	36,286	$	25,788	$	67,231	$	469,953	$	729	$	967,384	1. Pass	$	128,857	$	151,968	$	139,953	$	29,147	$	21,655	$	59,173	$	473,162	$	1,416	$	1,005,331
2. Special Mention	2. Special Mention	—		3,926		21,196		2,362		7,098		—		27,337		—		61,919		2. Special Mention	—		1,390		645		—		6,118		—		13,628		—		21,781
3. Substandard	3. Substandard	—		—		108		—		589		—		2,753		—		3,450		3. Substandard	—		852		8,804		—		589		—		12,647		—		22,892

Total	Total	$	27,521	$	198,066	$	167,040	$	38,648	$	33,475	$	67,231	$	500,043	$	729	$	1,032,753	Total	$	128,857	$	154,210	$	149,402	$	29,147	$	28,362	$	59,173	$	499,437	$	1,416	$	1,050,004
Current period gross charge-offs	Current period gross charge-offs	$	—	$	—	$	247	$	23	$	—	$	—	$	2,578	$	—	$	2,848	Current period gross charge-offs	$	6	$	50	$	296	$	67	$	—	$	151	$	3,321	$	—	$	3,891

Real Estate-Commercial	Real Estate-Commercial																			Real Estate-Commercial
Risk Rating	Risk Rating																			Risk Rating
1. Pass	1. Pass	$	117,401	$	880,556	$	682,078	$	703,079	$	360,218	$	304,672	$	52,553	$	—	$	3,100,557	1. Pass	$	391,320	$	854,572	$	644,754	$	621,144	$	339,709	$	332,824	$	63,383	$	—	$	3,247,706
2. Special Mention	2. Special Mention	—		854		10,250		5,725		—		2,816		1,771		—		21,416		2. Special Mention	1,250		231		8,899		5,873		—		1,420		—		—		17,673
3. Substandard	3. Substandard	—		—		1,949		1,701		—		2,587		—		—		6,237		3. Substandard	—		1,036		1,948		1,687		226		1,911		2,953		—		9,761

Total	Total	$	117,401	$	881,410	$	694,277	$	710,505	$	360,218	$	310,075	$	54,324	$	—	$	3,128,210	Total	$	392,570	$	855,839	$	655,601	$	628,704	$	339,935	$	336,155	$	66,336	$	—	$	3,275,140
Current period gross charge-offs	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	50	$	—	$	—	$	50	Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	50	$	—	$	—	$	50

Real Estate-Construction	Real Estate-Construction																			Real Estate-Construction
Risk Rating	Risk Rating																			Risk Rating
1. Pass	1. Pass	$	36,683	$	261,911	$	27,799	$	3,949	$	255	$	2,761	$	26,178	$	—	$	359,536	1. Pass	$	100,825	$	274,531	$	5,633	$	2,649	$	244	$	2,241	$	18,117	$	—	$	404,240
2. Special Mention	2. Special Mention	—		5,352		—		—		—		—		5,472		—		10,824		2. Special Mention	—		—		3,132		—		—		5,266		9,599		—		17,997
3. Substandard	3. Substandard	—		380		—		—		5,829		—		—		—		6,209		3. Substandard	2,761		—		—		—		—		—		2,563		—		5,324

Total	Total	$	36,683	$	267,643	$	27,799	$	3,949	$	6,084	$	2,761	$	31,650	$	—	$	376,569	Total	$	103,586	$	274,531	$	8,765	$	2,649	$	244	$	7,507	$	30,279	$	—	$	427,561
Current period gross charge-offs	Current period gross charge-offs	$	—	$	—	$	—	$	207	$	—	$	—	$	—	$	—	$	207	Current period gross charge-offs	$	—	$	207	$	—	$	—	$	—	$	—	$	—	$	—	$	207

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	$	30,786	$	162,069	$	131,702	$	65,443	$	40,142	$	38,726	$	27,696	$	—	$	496,564	1. Pass	$	89,444	$	153,772	$	122,981	$	62,977	$	39,173	$	18,243	$	28,944	$	—	$	515,534
2. Special Mention	2. Special Mention	—		—		—		245		—		934		—		—		1,179		2. Special Mention	—		—		—		—		—		—		—		—		—
3. Substandard	3. Substandard	—		—		211		26		—		488		37		—		762		3. Substandard	—		—		—		621		—		316		—		—		937

Total	Total	$	30,786	$	162,069	$	131,913	$	65,714	$	40,142	$	40,148	$	27,733	$	—	$	498,505	Total	$	89,444	$	153,772	$	122,981	$	63,598	$	39,173	$	18,559	$	28,944	$	—	$	516,471

Totals By Risk Rating	Totals By Risk Rating																			Totals By Risk Rating
1. Pass	1. Pass	$	212,391	$	1,498,676	$	987,315	$	808,757	$	426,403	$	413,390	$	576,380	$	729	$	4,924,041	1. Pass	$	710,446	$	1,434,843	$	913,321	$	715,917	$	400,781	$	412,481	$	583,606	$	1,416	$	5,172,811
2. Special Mention	2. Special Mention	—		10,132		31,446		8,332		7,098		3,750		34,580		—		95,338		2. Special Mention	1,250		1,621		12,676		5,873		6,118		6,686		23,227		—		57,451
3. Substandard	3. Substandard	—		380		2,268		1,727		6,418		3,075		2,790		—		16,658		3. Substandard	2,761		1,888		10,752		2,308		815		2,227		18,163		—		38,914

Total	Total	$	212,391	$	1,509,188	$	1,021,029	$	818,816	$	439,919	$	420,215	$	613,750	$	729	$	5,036,037	Total	$	714,457	$	1,438,352	$	936,749	$	724,098	$	407,714	$	421,394	$	624,996	$	1,416	$	5,269,176
Total current period gross charge-offs	Total current period gross charge-offs	$	—	$	—	$	247	$	230	$	—	$	50	$	2,578	$	—	$	3,105	Total current period gross charge-offs	$	6	$	257	$	296	$	67	$	—	$	201	$	3,321	$	—	$	4,148

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	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
At December 31, 2022
Commercial, Financial and Agricultural
Risk Rating
1. Pass	$	233,064	$	148,033	$	41,091	$	28,269	$	28,209	$	48,631	$	487,818	$	125	$	1,015,240
2. Special Mention	2,732		28,220		9,623		8,104		26		—		19,829		—		68,534
3. Substandard	—		13		—		—		—		—		5,141		—		5,154

Total	$	235,796	$	176,266	$	50,714	$	36,373	$	28,235	$	48,631	$	512,788	$	125	$	1,088,928


Real Estate-Commercial
Risk Rating
1. Pass	$	877,703	$	680,432	$	724,941	$	332,702	$	118,034	$	208,974	$	54,139	$	—	$	2,996,925
2. Special Mention	869		8,173		11,582		944		85		3,002		1,838		—		26,493
3. Substandard	—		—		1,770		—		2,222		495		50		—		4,537

Total	$	878,572	$	688,605	$	738,293	$	333,646	$	120,341	$	212,471	$	56,027	$	—	$	3,027,955


Real Estate-Construction
Risk Rating
1. Pass	$	243,983	$	52,485	$	8,341	$	34,670	$	191	$	442	$	30,223	$	—	$	370,335
2. Special Mention	—		5,781		—		5,695		—		—		—		—		11,476
3. Substandard	—		—		—		—		—		—		—		—		—

Total	$	243,983	$	58,266	$	8,341	$	40,365	$	191	$	442	$	30,223	$	—	$	381,811


Real Estate-Residential Secured for Business Purpose
Risk Rating
1. Pass	$	165,844	$	128,669	$	67,955	$	39,794	$	21,226	$	23,324	$	29,239	$	—	$	476,051
2. Special Mention	—		—		247		—		—		941		—		—		1,188
3. Substandard	—		211		27		—		38		594		145		—		1,015

Total	$	165,844	$	128,880	$	68,229	$	39,794	$	21,264	$	24,859	$	29,384	$	—	$	478,254


Totals By Risk Rating
1. Pass	$	1,520,594	$	1,009,619	$	842,328	$	435,435	$	167,660	$	281,371	$	601,419	$	125	$	4,858,551
2. Special Mention	3,601		42,174		21,452		14,743		111		3,943		21,667		—		107,691
3. Substandard	—		224		1,797		—		2,260		1,089		5,336		—		10,706

Total	$	1,524,195	$	1,052,017	$	865,577	$	450,178	$	170,031	$	286,403	$	628,422	$	125	$	4,976,948

The Corporation had no loans with a risk rating of Doubtful included within recorded investment in loans and leases held for investment at ~~March 31,~~September 30, 2023 or December 31, 2022.

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, 2022. Loans and leases past due 90 days or more and loans and leases on nonaccrual status are considered nonperforming. Nonperforming loans and leases are reviewed monthly. Performing loans and leases are reviewed only if the loan becomes 60 days or more past due.

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Based on the most recent analysis performed, the following table presents 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, 2023 and December 31, 2022.


		Term Loans Amortized Cost Basis by Origination Year																	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total		(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
At March 31, 2023
At September 30, 2023																		At September 30, 2023
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	$	45,329	$	265,019	$	213,723	$	138,347	$	23,519	$	92,037	$	83	$	778,057	1. Performing	$	118,896	$	290,452	$	211,229	$	130,133	$	23,124	$	83,042	$	—	$	856,876
2. Nonperforming	2. Nonperforming	—		158		47		—		309		986		—		1,500		2. Nonperforming	—		156		44		2,805		—		1,241		—		4,246
Total	Total	$	45,329	$	265,177	$	213,770	$	138,347	$	23,828	$	93,023	$	83	$	779,557	Total	$	118,896	$	290,608	$	211,273	$	132,938	$	23,124	$	84,283	$	—	$	861,122

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	$	219	$	2,761	$	614	$	467	$	186	$	1,743	$	165,135	$	171,125	1. Performing	$	380	$	2,626	$	558	$	427	$	172	$	1,563	$	170,376	$	176,102
2. Nonperforming	2. Nonperforming	—		—		—		—		—		45		903		948		2. Nonperforming	—		—		—		—		—		—		753		753
Total	Total	$	219	$	2,761	$	614	$	467	$	186	$	1,788	$	166,038	$	172,073	Total	$	380	$	2,626	$	558	$	427	$	172	$	1,563	$	171,129	$	176,855

Current period gross charge-offs																		Current period gross charge-offs	$	—	$	—	$	—	$	—	$	85	$	—	$	—	$	85

Loans to Individuals	Loans to Individuals																	Loans to Individuals
Payment Performance	Payment Performance																	Payment Performance
1. Performing	1. Performing	$	502	$	1,317	$	763	$	494	$	197	$	1,359	$	23,977	$	28,609	1. Performing	$	1,460	$	1,038	$	593	$	129	$	89	$	1,167	$	22,829	$	27,305
2. Nonperforming	2. Nonperforming	—		—		—		—		—		47		—		47		2. Nonperforming	—		—		—		—		—		26		—		26
Total	Total	$	502	$	1,317	$	763	$	494	$	197	$	1,406	$	23,977	$	28,656	Total	$	1,460	$	1,038	$	593	$	129	$	89	$	1,193	$	22,829	$	27,331
Current period gross charge-offs	Current period gross charge-offs	$	38	$	19	$	—	$	5	$	—	$	—	$	43	$	105	Current period gross charge-offs	$	155	$	33	$	—	$	5	$	28	$	21	$	98	$	340

Lease Financings	Lease Financings																	Lease Financings
Payment Performance	Payment Performance																	Payment Performance
1. Performing	1. Performing	$	31,451	$	88,155	$	56,656	$	29,682	$	12,776	$	3,946	$	—	$	222,666	1. Performing	$	86,834	$	76,340	$	46,368	$	21,533	$	7,684	$	1,502	$	—	$	240,261
2. Nonperforming	2. Nonperforming	—		654		111		18		4		28		—		815		2. Nonperforming	—		85		—		44		78		6		—		213
Total	Total	$	31,451	$	88,809	$	56,767	$	29,700	$	12,780	$	3,974	$	—	$	223,481	Total	$	86,834	$	76,425	$	46,368	$	21,577	$	7,762	$	1,508	$	—	$	240,474
Current period gross charge-offs	Current period gross charge-offs	$	—	$	—	$	—	$	20	$	—	$	—	$	—	$	20	Current period gross charge-offs	$	—	$	143	$	133	$	31	$	6	$	1	$	—	$	314

Totals by Payment Performance	Totals by Payment Performance																	Totals by Payment Performance
1. Performing	1. Performing	$	77,501	$	357,252	$	271,756	$	168,990	$	36,678	$	99,085	$	189,195	$	1,200,457	1. Performing	$	207,570	$	370,456	$	258,748	$	152,222	$	31,069	$	87,274	$	193,205	$	1,300,544
2. Nonperforming	2. Nonperforming	—		812		158		18		313		1,106		903		3,310		2. Nonperforming	—		241		44		2,849		78		1,273		753		5,238
Total	Total	$	77,501	$	358,064	$	271,914	$	169,008	$	36,991	$	100,191	$	190,098	$	1,203,767	Total	$	207,570	$	370,697	$	258,792	$	155,071	$	31,147	$	88,547	$	193,958	$	1,305,782
Total current period gross charge-offs	Total current period gross charge-offs	$	38	$	19	$	—	$	25	$	—	$	—	$	43	$	125	Total current period gross charge-offs	$	155	$	176	$	133	$	36	$	119	$	22	$	98	$	739

1821

Table of Contents


	Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
At December 31, 2022
Real Estate-Residential Secured for Personal Purpose
Payment Performance
1. Performing	$	258,293	$	211,638	$	140,822	$	23,827	$	18,273	$	75,126	$	108	$	728,087
2. Nonperforming	—		48		466		319		306		1,169		—		2,308
Total	$	258,293	$	211,686	$	141,288	$	24,146	$	18,579	$	76,295	$	108	$	730,395


Real Estate-Home Equity Secured for Personal Purpose
Payment Performance
1. Performing	$	2,945	$	642	$	491	$	192	$	205	$	1,565	$	169,870	$	175,910
2. Nonperforming	—		—		—		—		157		3		629		789
Total	$	2,945	$	642	$	491	$	192	$	362	$	1,568	$	170,499	$	176,699


Loans to Individuals
Payment Performance
1. Performing	$	1,581	$	857	$	554	$	247	$	138	$	1,340	$	23,117	$	27,834
2. Nonperforming	—		—		—		—		—		39		—		39
Total	$	1,581	$	857	$	554	$	247	$	138	$	1,379	$	23,117	$	27,873


Lease Financings
Payment Performance
1. Performing	$	94,430	$	61,680	$	33,468	$	15,164	$	5,569	$	768	$	—	$	211,079
2. Nonperforming	41		56		17		21		90		11		—		236
Total	$	94,471	$	61,736	$	33,485	$	15,185	$	5,659	$	779	$	—	$	211,315


Totals by Payment Performance
1. Performing	$	357,249	$	274,817	$	175,335	$	39,430	$	24,185	$	78,799	$	193,095	$	1,142,910
2. Nonperforming	41		104		483		340		553		1,222		629		3,372
Total	$	357,290	$	274,921	$	175,818	$	39,770	$	24,738	$	80,021	$	193,724	$	1,146,282

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, 2023 or December 31, 2022.

1922

Table of Contents

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

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, 2023 and 2022. There were no changes to the reasonable and supportable forecast period, the reversion period, or any significant methodology changes during the ~~three~~nine months ended ~~March 31,~~September 30, 2023.


(Dollars in thousands)	(Dollars in thousands)	Beginning balance		Provision (reversal of 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, 2023
Three Months Ended September 30, 2023												Three Months Ended September 30, 2023
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	$	16,920	$	547	$	(2,848)	$	106	$	14,725	Commercial, financial and agricultural	$	13,871	$	979	$	(744)	$	30	$	14,136
Real estate-commercial	Real estate-commercial	41,673		1,524		(50)		3		43,150		Real estate-commercial	44,757		519		—		3		45,279
Real estate-construction	Real estate-construction	4,952		(64)		(207)		—		4,681		Real estate-construction	5,433		298		—		1		5,732
Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	7,054		1,125		—		181		8,360		Real estate-residential secured for business purpose	8,696		(44)		—		4		8,656
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	3,685		1,327		—		—		5,012		Real estate-residential secured for personal purpose	5,588		254		—		—		5,842
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	1,287		(66)		—		50		1,271		Real estate-home equity secured for personal purpose	1,296		(38)		—		33		1,291
Loans to individuals	Loans to individuals	351		113		(105)		16		375		Loans to individuals	560		(61)		(124)		12		387
Lease financings	Lease financings	3,082		(634)		(20)		32		2,460		Lease financings	2,508		190		(189)		5		2,514
Unallocated	Unallocated	—		—		N/A		N/A		—		Unallocated	—		—		N/A		N/A		—
Total	Total	$	79,004	$	3,872	$	(3,230)	$	388	$	80,034	Total	$	82,709	$	2,097	$	(1,057)	$	88	$	83,837
Three Months Ended March 31, 2022
Three Months Ended September 30, 2022												Three Months Ended September 30, 2022
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	$	13,538	$	(1,672)	$	(214)	$	189	$	11,841	Commercial, financial and agricultural	$	13,004	$	2,110	$	(310)	$	181	$	14,985
Real estate-commercial	Real estate-commercial	41,095		(669)		—		—		40,426		Real estate-commercial	41,678		1,286		(999)		3		41,968
Real estate-construction	Real estate-construction	4,575		(941)		—		—		3,634		Real estate-construction	4,223		(376)		—		—		3,847
Real estate-residential secured for business purpose	Real estate-residential secured for business purpose	6,482		(328)		—		48		6,202		Real estate-residential secured for business purpose	6,420		433		—		2		6,855
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	2,403		189		—		—		2,592		Real estate-residential secured for personal purpose	2,937		419		—		—		3,356
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	1,028		(53)		—		1		976		Real estate-home equity secured for personal purpose	1,074		73		—		49		1,196
Loans to individuals	Loans to individuals	363		57		(75)		24		369		Loans to individuals	376		54		(79)		21		372
Lease financings	Lease financings	2,290		5		(59)		10		2,246		Lease financings	2,299		115		(70)		6		2,350
Unallocated	Unallocated	150		(150)		N/A		N/A		—		Unallocated	—		—		N/A		N/A		—
Total	Total	$	71,924	$	(3,562)	$	(348)	$	272	$	68,286	Total	$	72,011	$	4,114	$	(1,458)	$	262	$	74,929

N/A – Not applicable

2023

Table of Contents


(Dollars in thousands)	Beginning balance		Provision (reversal of provision) for credit losses		Charge-offs		Recoveries		Ending balance
Nine Months Ended September 30, 2023
Allowance for credit losses, loans and leases:
Commercial, financial and agricultural	$	16,920	$	937	$	(3,891)	$	170	$	14,136
Real estate-commercial	41,673		3,647		(50)		9		45,279
Real estate-construction	4,952		986		(207)		1		5,732
Real estate-residential secured for business purpose	7,054		1,417		—		185		8,656
Real estate-residential secured for personal purpose	3,685		2,157		—		—		5,842
Real estate-home equity secured for personal purpose	1,287		6		(85)		83		1,291
Loans to individuals	351		314		(340)		62		387
Lease financings	3,082		(308)		(314)		54		2,514
Unallocated	—		—		N/A		N/A		—
Total	$	79,004	$	9,156	$	(4,887)	$	564	$	83,837
Nine Months Ended September 30, 2022
Allowance for credit losses, loans and leases:
Commercial, financial and agricultural	$	13,538	$	1,560	$	(524)	$	411	$	14,985
Real estate-commercial	41,095		3,559		(2,689)		3		41,968
Real estate-construction	4,575		(728)		—		—		3,847
Real estate-residential secured for business purpose	6,482		320		—		53		6,855
Real estate-residential secured for personal purpose	2,403		953		—		—		3,356
Real estate-home equity secured for personal purpose	1,028		130		—		38		1,196
Loans to individuals	363		125		(181)		65		372
Lease financings	2,290		223		(187)		24		2,350
Unallocated	150		(150)		N/A		N/A		—
Total	$	71,924	$	5,992	$	(3,581)	$	594	$	74,929

N/A – Not applicable

Table of Contents

The following presents, by portfolio segment, the balance in the ~~ACL~~allowance for credit losses 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, 2023 and 2022:

Allowance for credit losses, loans and leases Loans and leases held for investment
(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, 2023
Commercial, financial and agricultural $ 912 $ 13,813 $ 14,725 $ 3,423 $ 1,029,330 $ — $ 1,032,753
Real estate-commercial — 43,150 43,150 4,288 3,123,922 — 3,128,210
Real estate-construction — 4,681 4,681 383 376,186 — 376,569
Real estate-residential secured for business purpose — 8,360 8,360 759 497,746 — 498,505
Real estate-residential secured for personal purpose — 5,012 5,012 1,500 778,057 — 779,557
Real estate-home equity secured for personal purpose — 1,271 1,271 948 171,125 — 172,073
Loans to individuals — 375 375 — 28,656 — 28,656
Lease financings — 2,460 2,460 — 223,481 — 223,481
Total $ 912 $ 79,122 $ 80,034 $ 11,301 $ 6,228,503 $ — $ 6,239,804
At March 31, 2022
Commercial, financial and agricultural $ — $ 11,841 $ 11,841 $ 448 $ 942,335 $ — $ 942,783
Real estate-commercial 954 39,472 40,426 26,411 2,790,313 13 2,816,737
Real estate-construction — 3,634 3,634 — 285,083 — 285,083
Real estate-residential secured for business purpose — 6,202 6,202 1,120 411,366 — 412,486
Real estate-residential secured for personal purpose — 2,592 2,592 2,259 566,476 — 568,735
Real estate-home equity secured for personal purpose — 976 976 489 159,645 — 160,134
Loans to individuals — 369 369 — 26,249 — 26,249
Lease financings — 2,246 2,246 — 188,579 — 188,579
Total $ 954 $ 67,332 $ 68,286 $ 30,727 $ 5,370,046 $ 13 $ 5,400,786

~~N/A – Not applicable~~


	Allowance for credit losses, loans and leases						Loans and leases held for investment
(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 September 30, 2023
Commercial, financial and agricultural	$	814	$	13,322	$	14,136	$	1,754	$	1,048,250	$	—	$	1,050,004
Real estate-commercial	20		45,259		45,279		4,863		3,270,277		—		3,275,140
Real estate-construction	—		5,732		5,732		—		427,561		—		427,561
Real estate-residential secured for business purpose	—		8,656		8,656		936		515,535		—		516,471
Real estate-residential secured for personal purpose	—		5,842		5,842		4,246		856,876		—		861,122
Real estate-home equity secured for personal purpose	—		1,291		1,291		753		176,102		—		176,855
Loans to individuals	—		387		387		—		27,331		—		27,331
Lease financings	—		2,514		2,514		—		240,474		—		240,474
Total	$	834	$	83,003	$	83,837	$	12,552	$	6,562,406	$	—	$	6,574,958
At September 30, 2022
Commercial, financial and agricultural	$	1,407	$	13,578	$	14,985	$	2,630	$	1,052,310	$	—	$	1,054,940
Real estate-commercial	250		41,718		41,968		7,527		2,928,677		—		2,936,204
Real estate-construction	—		3,847		3,847		—		329,915		—		329,915
Real estate-residential secured for business purpose	—		6,855		6,855		1,009		442,828		—		443,837
Real estate-residential secured for personal purpose	—		3,356		3,356		1,868		683,903		—		685,771
Real estate-home equity secured for personal purpose	—		1,196		1,196		522		175,321		—		175,843
Loans to individuals	—		372		372		—		26,679		—		26,679
Lease financings	—		2,350		2,350		—		196,070		—		196,070
Total	$	1,657	$	73,272	$	74,929	$	13,556	$	5,835,703	$	—	$	5,849,259

Modified Loans to Borrowers Experiencing Financial Difficulty

The following presents, by class of loans, information regarding accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended ~~March 31,~~September 30, 2023.

Three Months Ended March 31, 2023
(Dollars in thousands) Number
of
Loans Amortized Cost Basis* % of Total Class of Financing Receivable Related
Reserve
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate—construction 1 $ 5,829 1.2 % $ 16
Total 1 $ 5,829 $ 16
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial, financial and agricultural 1 $ 2,620 0.3 % $ 538
Total 1 $ 2,620 $ 538

*Amortized cost excludes $26 thousand of accrued interest receivable on modified loans.

Three Months Ended September 30, 2023

(Dollars in thousands)

Number
of
Loans

Amortized Cost Basis

% of Total Class of Financing Receivable

Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:

Total

—

Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

Total

—

Table of Contents


	Nine Months Ended September 30, 2023
(Dollars in thousands)	Number of Loans	Amortized Cost Basis*		% of Total Class of Financing Receivable
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:

Real estate—commercial real estate	1	$	1,948	0.06	%



Total	1	$	1,948
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

Real estate—commercial real estate	1	$	1,741	0.05	%



Total	1	$	1,741

*Amortized cost excludes $15 thousand of accrued interest receivable on modified loans.

During the first quarter of 2023, a $5.8 million construction loan was modified. During the second quarter of 2023, the modified loan was placed on nonaccrual status. During the third quarter of 2023, the nonaccrual modified loan was transferred to held for sale.

The following presents, by class of loans, information regarding the financial effect on accruing and nonaccrual modified loans to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023.

Term Extension

(Dollars in thousands)

No. of
Loans

Financial Effect

Three Months Ended September 30, 2023

Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:

Total

—

Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

Total

—

~~Term Extension~~

~~(Dollars in thousands)~~

No. of
Loans

~~Financial Effect~~

~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023

Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:

Real estate—commercial real estate

Extended loan maturity by 5 months to give borrower time to seek refinance.

~~Real estate—construction~~

~~Extended the loan maturity by 8 months to allow time for the construction to be completed. 3 months of interest payments were capitalized to the loan balance.~~

Total

Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

~~Commercial, financial and agricultural~~Real estate—commercial real estate

Extended ~~the~~ loan maturity by 1016 months ~~in order~~ to ~~provide~~give borrower time to ~~borrower to liquidate collateral for loan payoff.~~seek refinance.

Total

There were no accruing or nonaccrual modified loans to borrowers experiencing financial difficulty for which there were payment defaults ~~after~~during the ~~modification date~~period that were modified in the 12 months before default for the three and nine months ended ~~March 31,~~September 30, 2023.

Table of Contents

The following presents, by class of loans, the amortized cost and ~~payment~~performance status of accruing and nonaccrual modified loans to borrowers experiencing financial difficulty ~~at March 31, 2023.~~that have been modified in the last 12 months.


		At March 31, 2023									At September 30, 2023
(Dollars in thousands)	(Dollars in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Total		(Dollars in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Total
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:	Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:									Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate—construction		$	5,829	$	—	$	—	$	5,829
Real estate—commercial real estate										Real estate—commercial real estate	$	1,948	$	—	$	—	$	1,948

Total	Total	$	5,829	$	—	$	—	$	5,829	Total	$	1,948	$	—	$	—	$	1,948
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:	Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:									Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial, financial and agricultural		$	2,620	$	—	$	—	$	2,620

Real estate—commercial real estate										Real estate—commercial real estate	$	1,741	$	—	$	—	$	1,741

Total	Total	$	2,620	$	—	$	—	$	2,620	Total	$	1,741	$	—	$	—	$	1,741

As of September 30, 2023, the Bank had no commitments to extend credit to borrowers experiencing financial difficulty whose terms had been modified.

The 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, 2023 or December 31, 2022.


(Dollars in thousands)	(Dollars in thousands)	At March 31, 2023		At December 31, 2022		(Dollars in thousands)	At September 30, 2023		At December 31, 2022
Real estate-residential secured for personal purpose	Real estate-residential secured for personal purpose	$	2,812	$	822	Real estate-residential secured for personal purpose	$	3,140	$	822
Real estate-home equity secured for personal purpose	Real estate-home equity secured for personal purpose	71		72		Real estate-home equity secured for personal purpose	22		72
Total	Total	$	2,883	$	894	Total	$	3,162	$	894

~~There was no~~

The following presents foreclosed residential real estate property included in other real estate owned at ~~March 31,~~September 30, 2023 or December 31, 2022.


(Dollars in thousands)	At September 30, 2023		At December 31, 2022
Foreclosed residential real estate	$	79
$		—

Lease Financings

The following presents the schedule of minimum lease payments receivable:


(Dollars in thousands)	(Dollars in thousands)	At March 31, 2023		At December 31, 2022		(Dollars in thousands)	At September 30, 2023		At December 31, 2022
2023 (excluding the three months ended March 31, 2023)		$	74,280	$	75,900
2023 (excluding the nine months ended September 30, 2023)						2023 (excluding the nine months ended September 30, 2023)	$	26,581	$	75,900
2024	2024	66,701		61,793		2024	76,785		61,793
2025	2025	49,414		45,738		2025	63,625		45,738
2026	2026	33,086		29,902		2026	49,774		29,902
2027	2027	14,603		13,091		2027	32,846		13,091
Thereafter	Thereafter	5,421		2,552		Thereafter	15,011		2,552
Total future minimum lease payments receivable	Total future minimum lease payments receivable	243,505		228,976		Total future minimum lease payments receivable	264,622		228,976
Plus: Unguaranteed residual	Plus: Unguaranteed residual	1,212		1,387		Plus: Unguaranteed residual	1,079		1,387
Plus: Initial direct costs	Plus: Initial direct costs	3,150		2,884		Plus: Initial direct costs	3,398		2,884
Less: Imputed interest	Less: Imputed interest	(24,386)		(21,932)		Less: Imputed interest	(28,625)		(21,932)
Lease financings	Lease financings	$	223,481	$	211,315	Lease financings	$	240,474	$	211,315

Table of Contents

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. Changes in the carrying amount of the Corporation's goodwill by business segment for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 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, 2022	Balance at December 31, 2022	$	138,476	$	15,434	$	21,600	$	175,510	Balance at December 31, 2022	$	138,476	$	15,434	$	21,600	$	175,510
Addition to goodwill from acquisitions	Addition to goodwill from acquisitions	—		—		—		—		Addition to goodwill from acquisitions	—		—		—		—
Balance at March 31, 2023		$	138,476	$	15,434	$	21,600	$	175,510
Balance at September 30, 2023										Balance at September 30, 2023	$	138,476	$	15,434	$	21,600	$	175,510

The Corporation also has core deposit and customer-related intangibles, 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 following table reflects the components of intangible assets at the dates indicated:


		At March 31, 2023						At December 31, 2022							At September 30, 2023						At December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization (1)		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization (1)		Net Carrying Amount		(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization (1)		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization (1)		Net Carrying Amount
Amortized intangible assets:	Amortized intangible assets:													Amortized intangible assets:

Core deposit intangibles	Core deposit intangibles	$	6,788	$	6,048	$	740	$	6,788	$	5,939	$	849	Core deposit intangibles	$	6,788	$	6,244	$	544	$	6,788	$	5,939	$	849
Customer related intangibles	Customer related intangibles	4,162		2,318		1,844		8,493		6,530		1,963		Customer related intangibles	4,162		2,548		1,614		8,493		6,530		1,963
Servicing rights	Servicing rights	29,181		20,721		8,460		28,904		20,332		8,572		Servicing rights	30,360		21,439		8,921		28,904		20,332		8,572
Total amortized intangible assets	Total amortized intangible assets	$	40,131	$	29,087	$	11,044	$	44,185	$	32,801	$	11,384	Total amortized intangible assets	$	41,310	$	30,231	$	11,079	$	44,185	$	32,801	$	11,384

(1) Included within accumulated amortization is a valuation allowance of ~~$40~~$12 thousand and $5 thousand on servicing rights at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively.

The estimated aggregate amortization expense for core deposit and customer-related intangibles for the remainder of 2023 and the succeeding fiscal years is as follows:


Year	Year	(Dollars in thousands)	Amount		Year	(Dollars in thousands)	Amount
Remainder of 2023	Remainder of 2023		$	616	Remainder of 2023		$	190
2024	2024		648		2024		648
2025	2025		469		2025		469
2026	2026		319		2026		319
2027	2027		216		2027		216
Thereafter	Thereafter		316		Thereafter		316
Total	Total		$	2,584	Total		$	2,158

The aggregate fair value of servicing rights was $19.0 million and $16.8 million at ~~March 31,~~September 30, 2023 and December 31, ~~2022.~~2022, respectively. The fair value of these rights was determined using a discount rate ~~ranging from 10.4% to 12.4%~~of 12.2% at ~~March 31,~~September 30, 2023 and a range of 10.1% to 12.0% at December 31, 2022.

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)	2023		2022			(Dollars in thousands)	2023		2022		2023		2022
Beginning of period	Beginning of period	$	8,572	$	7,878		Beginning of period	$	8,568	$	8,372	$	8,572	$	7,878
Servicing rights capitalized	Servicing rights capitalized	277		714			Servicing rights capitalized	707		578		1,456		1,969

Amortization of servicing rights	Amortization of servicing rights	(354)		(476)			Amortization of servicing rights	(350)		(383)		(1,100)		(1,290)
Changes in valuation allowance	Changes in valuation allowance	(35)		6			Changes in valuation allowance	(4)		2		(7)		12
End of period	End of period	$	8,460	$	8,122		End of period	$	8,921	$	8,569	$	8,921	$	8,569
Loans serviced for others	Loans serviced for others	$	1,496,319	$	1,440,562		Loans serviced for others	$	1,568,817	$	1,484,738	$	1,568,817	$	1,484,738

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Activity in the valuation allowance for 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)	2023		2022			(Dollars in thousands)	2023		2022		2023		2022
Valuation allowance, beginning of period	Valuation allowance, beginning of period	$	(5)	$	(13)		Valuation allowance, beginning of period	$	(8)	$	(3)	$	(5)	$	(13)
Additions	Additions	(35)		—			Additions	(4)		—		(7)		—
Reductions	Reductions	—		6			Reductions	—		2		—		12

Valuation allowance, end of period	Valuation allowance, end of period	$	(40)	$	(7)		Valuation allowance, end of period	$	(12)	$	(1)	$	(12)	$	(1)

The estimated amortization expense of servicing rights for the remainder of 2023 and the succeeding fiscal years is as follows:


Year	Year	(Dollars in thousands)	Amount		Year	(Dollars in thousands)	Amount
Remainder of 2023	Remainder of 2023		$	1,072	Remainder of 2023		$	1,042
2024	2024		958		2024		943
2025	2025		855		2025		850
2026	2026		761		2026		765
2027	2027		641		2027		687
Thereafter	Thereafter		4,173		Thereafter		4,634
Total	Total		$	8,460	Total		$	8,921

Note 6. Deposits

Deposits and their respective weighted average interest rate at ~~March 31,~~September 30, 2023 and December 31, 2022 consisted of the following:


		At March 31, 2023				At December 31, 2022					At September 30, 2023				At December 31, 2022
		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Amount			Weighted Average Interest Rate		Amount		Weighted Average Interest Rate		Amount
		(Dollars in thousands)									(Dollars in thousands)
Noninterest-bearing deposits	Noninterest-bearing deposits	—	%	$	1,799,225	—	%	$	2,047,263	Noninterest-bearing deposits	—	%	$	1,432,559	—	%	$	2,047,263
Demand deposits	Demand deposits	2.56		2,433,575		2.02		2,321,748		Demand deposits	3.40		3,021,009		2.02		2,321,748
Savings deposits	Savings deposits	0.39		955,530		0.25		1,025,431		Savings deposits	0.48		817,078		0.25		1,025,431
Time deposits	Time deposits	2.91		646,327		2.07		519,084		Time deposits	4.08		1,168,519		2.07		519,084
Total	Total	1.45	%	$	5,834,657	1.02	%	$	5,913,526	Total	2.40	%	$	6,439,165	1.02	%	$	5,913,526

Deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC, which is currently ~~up to~~ $250 thousand per account owner. The aggregate amount of time deposits in denominations over $250 thousand was ~~$121.7~~$176.4 million at ~~March 31,~~September 30, 2023 and $95.0 million at December 31, 2022.

At ~~March 31,~~September 30, 2023, the scheduled maturities of time deposits were as follows:


Year	Year	(Dollars in thousands)	Amount		Year	(Dollars in thousands)	Amount
Remainder of 2023	Remainder of 2023		$	259,767	Remainder of 2023		$	213,065
2024	2024		196,555		2024		411,122
2025	2025		158,162		2025		301,253
2026	2026		14,600		2026		39,288
2027	2027		8,246		2027		69,372
Thereafter	Thereafter		8,997		Thereafter		134,419
Total	Total		$	646,327	Total		$	1,168,519

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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, 2023				At December 31, 2022					At September 30, 2023				At December 31, 2022
(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:
FHLB borrowings	FHLB borrowings	$	163,700	5.15	%	$	125,000	4.45	%	FHLB borrowings	$	—	—	%	$	125,000	4.45	%
Federal funds purchased	Federal funds purchased	90,000		5.26		60,000		4.63		Federal funds purchased	—		—		60,000		4.63
Customer repurchase agreements	Customer repurchase agreements	18,181		0.05		12,141		0.05		Customer repurchase agreements	14,676		0.05		12,141		0.05

Long-term debt:	Long-term debt:									Long-term debt:
FHLB advances	FHLB advances	$	220,000	3.52	%	$	95,000	1.34	%	FHLB advances	$	320,000	3.71	%	$	95,000	1.34	%

Subordinated notes	Subordinated notes	148,385		6.08		148,260		6.09		Subordinated notes	148,636		6.08		148,260		6.09

The Corporation, through the Bank, has a credit facility with the Federal Home Loan Bank (the FHLB) with a maximum borrowing capacity of approximately ~~$3.0~~$3.1 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, 2023 and December 31, 2022, the Bank had outstanding short-term letters of credit with the FHLB totaling ~~$830.4 million~~$1.3 billion and $690.5 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 ~~$1.7~~$1.5 billion at ~~March 31,~~September 30, 2023.

The Corporation, through the Bank, holds collateral at the Federal Reserve Bank of Philadelphia to provide access to the Discount Window Lending program. The collateral, consisting of investment securities, was valued at ~~$119.6~~$127.9 million and $98.1

million at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. At ~~March 31,~~September 30, 2023 and December 31, 2022, the Corporation had no 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, 2023 and December 31, 2022, the Corporation had no outstanding borrowings under this line.

The Corporation and the Bank had ~~$3.1~~$3.3 billion and $3.0 billion of committed borrowing capacity at ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, of which ~~$1.9~~$1.7 billion and $2.1 billion was available as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. The Corporation, through the Bank, also maintained unused uncommitted funding sources from correspondent banks of $369.0 million at September 30, 2023 and $410.0 million at ~~March 31, 2023 and~~ December 31, 2022, of which ~~$320.0~~$369.0 million and $350.0 million were unused as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. 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 of Pittsburgh mature as follows:


(Dollars in thousands)	(Dollars in thousands)	As of March 31, 2023		Weighted Average Rate		(Dollars in thousands)	As of September 30, 2023		Weighted Average Rate
Remainder of 2023	Remainder of 2023	$	10,000	3.02	%	Remainder of 2023	$	10,000	3.02	%
2024	2024	85,000		2.10		2024	85,000		2.10
2025	2025	50,000		4.59		2025	75,000		4.46
2026	2026	50,000		4.42		2026	100,000		4.29
2027	2027	—		—		2027	25,000		3.99
Thereafter	Thereafter	25,000		4.61		Thereafter	25,000		4.61
Total	Total	$	220,000	3.52	%	Total	$	320,000	3.71	%

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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,
		2023		2022		2023		2022			2023		2022		2023		2022
(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	$	137	$	19	$	30	Service cost	$	133	$	140	$	19	$	30
Interest cost	Interest cost	597		390		32		24		Interest cost	590		393		32		25
Expected loss on plan assets	Expected loss on plan assets	(770)		(933)		—		—		Expected loss on plan assets	(762)		(940)		—		—
Amortization of net actuarial loss (gain)	Amortization of net actuarial loss (gain)	250		204		(4)		14		Amortization of net actuarial loss (gain)	250		205		(3)		14

Net periodic benefit cost (income)	Net periodic benefit cost (income)	$	207	$	(202)	$	47	$	68	Net periodic benefit cost (income)	$	211	$	(202)	$	48	$	69


	Nine Months Ended September 30,
	2023		2022		2023		2022
(Dollars in thousands)	Retirement Plans				Other Post Retirement Benefits
Service cost	$	399	$	419	$	57	$	92
Interest cost	1,774		1,180		96		73
Expected loss on plan assets	(2,293)		(2,818)		—		—
Amortization of net actuarial loss (gain)	750		614		(11)		41

Net periodic benefit cost (income)	$	630	$	(605)	$	142	$	206

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

The Corporation expects to make total contributions of $156 thousand to the Retirement Plans and $130 thousand to Other Postretirement Benefit Plans in 2023. During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, the Corporation contributed ~~$39~~$117 thousand to its Non-Qualified Retirement Benefit Plans and ~~$23~~$69 thousand to its Other Postretirement Benefit Plans. During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, ~~$713 thousand~~$2.1 million was paid to participants from the Retirement Plans and ~~$23~~$69 thousand was paid to participants from the Other Postretirement Benefit Plans.

Note 9. Stock-Based Incentive Plan

The Corporation maintains the ~~2013~~2023 Long-Term Incentive Plan (the Plan), which replaced the expired ~~2003~~2013 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.~~ On April 26, 2023, the ~~2023 Equity Incentive~~ Plan was approved by shareholders at the Corporation's annual meeting.

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, 2023:


(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, 2023		(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, 2023
Outstanding at December 31, 2022	Outstanding at December 31, 2022	294,111	$	26.11				Outstanding at December 31, 2022	294,111	$	26.11

Forfeited								Forfeited	(14,487)	28.35
Exercised	Exercised	(4,167)	17.89					Exercised	(6,210)	18.48
Outstanding at March 31, 2023		289,944	26.23		3.9	$	302
Exercisable at March 31, 2023		289,944	26.23		3.9	302
Outstanding at September 30, 2023								Outstanding at September 30, 2023	273,414	26.16		3.4	$	—
Exercisable at September 30, 2023								Exercisable at September 30, 2023	273,414	26.16		3.4	—

The Corporation did not issue stock options during the ~~three~~nine months ended ~~March 31,~~September 30, 2023 or ~~March~~ September 30, 2022.

31 ~~2022.~~

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The following is a summary of nonvested restricted stock units at ~~March 31,~~September 30, 2023 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 Units	Weighted Average Grant Date Fair Value		(Dollars in thousands, except per share data)	Nonvested Stock Units	Weighted Average Grant Date Fair Value
Nonvested stock units at December 31, 2022	Nonvested stock units at December 31, 2022	408,264	$	25.57	Nonvested stock units at December 31, 2022	408,264	$	25.57
Granted	Granted	213,429	25.04		Granted	213,429	25.04
Added by performance factor	Added by performance factor	814	19.20		Added by performance factor	814	19.20
Vested	Vested	(174,798)	21.95		Vested	(181,508)	22.21
Forfeited	Forfeited	(6,114)	27.62		Forfeited	(28,396)	27.20
Nonvested stock units at March 31, 2023		441,595	$	26.71
Nonvested stock units at September 30, 2023					Nonvested stock units at September 30, 2023	412,603	$	26.65

Certain information regarding restricted stock 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)	2023		2022		(Dollars in thousands, except per share data)	2023		2022
Restricted stock units granted	Restricted stock units granted	213,429		164,319		Restricted stock units granted	213,429		184,863
Weighted average grant date fair value	Weighted average grant date fair value	$	25.04	$	28.36	Weighted average grant date fair value	$	25.04	$	28.07
Intrinsic value of units granted	Intrinsic value of units granted	$	5,345	$	4,660	Intrinsic value of units granted	$	5,345	$	5,189
Restricted stock units vested	Restricted stock units vested	174,798		118,834		Restricted stock units vested	181,508		124,167
Weighted average grant date fair value	Weighted average grant date fair value	$	21.95	$	23.29	Weighted average grant date fair value	$	22.21	$	23.53
Intrinsic value of units vested	Intrinsic value of units vested	$	4,385	$	3,377	Intrinsic value of units vested	$	4,512	$	3,519

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, 2023 is presented below:

(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

9,603

2.3

Restricted stock units

6,844

1.9

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)	2023		2022		(Dollars in thousands)	2023		2022
Stock-based compensation expense:	Stock-based compensation expense:					Stock-based compensation expense:

Restricted stock units	Restricted stock units	$	1,110	$	934	Restricted stock units	$	3,229	$	2,998
Employee stock purchase plan	Employee stock purchase plan	29		25		Employee stock purchase plan	83		78
Total	Total	$	1,139	$	959	Total	$	3,312	$	3,076
Tax benefit on nonqualified stock option expense and disqualifying dispositions of incentive stock options	Tax benefit on nonqualified stock option expense and disqualifying dispositions of incentive stock options	$	35	$	1	Tax benefit on nonqualified stock option expense and disqualifying dispositions of incentive stock options	$	492	$	436

2732

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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 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
Balance, December 31, 2022	Balance, December 31, 2022	$	(40,066)	$	(6,831)	$	(15,207)	$	(62,104)	Balance, December 31, 2022	$	(40,066)	$	(6,831)	$	(15,207)	$	(62,104)
Other comprehensive income		4,491		1,869		194		6,554
Balance, March 31, 2023		$	(35,575)	$	(4,962)	$	(15,013)	$	(55,550)
Other comprehensive (loss) income										Other comprehensive (loss) income	(7,911)		(2,154)		583		(9,482)
Balance, September 30, 2023										Balance, September 30, 2023	$	(47,977)	$	(8,985)	$	(14,624)	$	(71,586)

Balance, December 31, 2021	Balance, December 31, 2021	$	(1,216)	$	(159)	$	(14,978)	$	(16,353)	Balance, December 31, 2021	$	(1,216)	$	(159)	$	(14,978)	$	(16,353)
Other comprehensive (loss) income	Other comprehensive (loss) income	(15,842)		114		172		(15,556)		Other comprehensive (loss) income	(42,232)		(6,917)		517		(48,632)
Balance, March 31, 2022		$	(17,058)	$	(45)	$	(14,806)	$	(31,909)
Balance, September 30, 2022										Balance, September 30, 2022	$	(43,448)	$	(7,076)	$	(14,461)	$	(64,985)

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 changes in fair value and any collateral that is held by a third party.

In May 2022, the Corporation entered into an interest rate swap classified as a cash flow hedge with a notional amount of $250.0 million to hedge the interest payments received on a pool of variable rate loans. Under the terms of the swap agreement, the Corporation pays a variable rate equal to the Prime Rate and receives a fixed rate of 5.99%. The swap matures in May 2026. The Corporation performed an assessment of the hedge for effectiveness at the inception of the hedge and performs an assessment on a recurring basis and determined that the derivative currently is and is expected to be highly effective in offsetting changes in cash flows of the hedged item. At ~~March 31,~~September 30, 2023, approximately ~~$3.6~~$5.1 million, net of tax, which is recorded in accumulated other comprehensive loss, is 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, 2023. At ~~March 31,~~September 30, 2023, the notional amount of the interest rate swap was $250.0 million and the fair value was a liability of ~~$6.3~~$11.4 million.

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, 2023, the Corporation had exposure to ~~124~~137 variable-rate to fixed-rate interest rate swap transactions between the third-party financial institution and customers with a current notional amount of ~~$792.8~~$880.9 million and remaining maturities ranging from 137 months to 11 years. At ~~March 31,~~September 30, 2023, the fair value of the Corporation's interest rate swap credit derivatives was a liability of ~~$330~~$167 thousand. At ~~March 31,~~September 30, 2023, the fair value of the swaps to the customers was a net gain of ~~$58.1~~$88.0 million. At ~~March 31,~~September 30, 2023, the Corporation's credit exposure related to the customer totaled ~~$1.7 million.~~$106 thousand.

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

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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~~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, 2023 and December 31, 2022. 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, 2023
At September 30, 2023										At September 30, 2023
Interest rate swap - cash flow hedge	Interest rate swap - cash flow hedge	$	250,000		$	—	Other liabilities	$	6,282	Interest rate swap - cash flow hedge	$	250,000		$	—	Other liabilities	$	11,374

Total	Total	$	250,000		$	—		$	6,282	Total	$	250,000		$	—		$	11,374
At December 31, 2022	At December 31, 2022									At December 31, 2022
Interest rate swap - cash flow hedge	Interest rate swap - cash flow hedge	$	250,000		$	—	Other liabilities	$	8,647	Interest rate swap - cash flow hedge	$	250,000		$	—	Other liabilities	$	8,647

Total	Total	$	250,000		$	—		$	8,647	Total	$	250,000		$	—		$	8,647

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, 2023 and December 31, 2022:


				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, 2023
At September 30, 2023										At September 30, 2023

Credit derivatives	Credit derivatives	$	792,838		$	—	Other liabilities	$	330	Credit derivatives	$	880,933		$	—	Other liabilities	$	167
Interest rate locks with customers	Interest rate locks with customers	21,208		Other assets	265			—		Interest rate locks with customers	28,744		Other assets	136			—
Forward loan sale commitments	Forward loan sale commitments	26,633			—		Other liabilities	6		Forward loan sale commitments	39,467		Other assets	148			—
Total	Total	$	840,679		$	265		$	336	Total	$	949,144		$	284		$	167
At December 31, 2022	At December 31, 2022									At December 31, 2022

Credit derivatives	Credit derivatives	$	815,469		$	—	Other liabilities	$	360	Credit derivatives	$	815,469		$	—	Other liabilities	$	360
Interest rate locks with customers	Interest rate locks with customers	10,269		Other assets	119			—		Interest rate locks with customers	10,269		Other assets	119			—
Forward loan sale commitments	Forward loan sale commitments	15,306		Other assets	29			—		Forward loan sale commitments	15,306		Other assets	29			—
Total	Total	$	841,044		$	148		$	360	Total	$	841,044		$	148		$	360

The following table presents amounts included in the condensed 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)		2023		2022				Statement of Income Classification	2023		2022		2023		2022

Interest rate swap—cash flow hedge—net interest payments	Interest rate swap—cash flow hedge—net interest payments	Interest expense	$	1,060	$	68		Interest rate swap—cash flow hedge—net interest payments		$	1,558	$	(422)	$	3,989	$	(1,040)

Total net loss			$	(1,060)	$	(68)
Total net (loss) gain								Total net (loss) gain				$	(1,558)	$	422	$	(3,989)	$	1,040

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The following table presents amounts included in the condensed 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)		2023		2022				Statement of Income Classification	2023		2022		2023		2022

Credit derivatives	Credit derivatives	Other noninterest income	$	86	$	450		Credit derivatives		$	263	$	316	$	1,170	$	1,355
Interest rate locks with customers	Interest rate locks with customers	Net gain (loss) on mortgage banking activities	146		(1,010)			Interest rate locks with customers		Net (loss) gain on mortgage banking activities		(66)		(862)		16		(1,189)
Forward loan sale commitments	Forward loan sale commitments	Net (loss) gain on mortgage banking activities	(34)		719			Forward loan sale commitments	Net (loss) gain on mortgage banking activities	(13)		640		119		584
Total net gain	Total net gain		$	198	$	159		Total net gain		$	184	$	94	$	1,305	$	750

The following table presents amounts included in accumulated other comprehensive (loss) income for derivatives designated as hedging instruments at ~~March 31,~~September 30, 2023 and December 31, 2022:


(Dollars in thousands)	(Dollars in thousands)	Accumulated Other Comprehensive (Loss) Income	At March 31, 2023		At December 31, 2022		(Dollars in thousands)	Accumulated Other Comprehensive (Loss) Income	At September 30, 2023		At December 31, 2022
Interest rate swap—cash flow hedge	Interest rate swap—cash flow hedge	Fair value, net of taxes	$	(4,962)	$	(6,831)	Interest rate swap—cash flow hedge	Fair value, net of taxes	$	(8,985)	$	(6,831)
Total	Total		$	(4,962)	$	(6,831)	Total		$	(8,985)	$	(6,831)

Note 12. Fair Value Disclosures

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

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.

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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, 2023.

Loans Held for Sale

The fair value of our mortgage 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. At September 30, 2023, loans held for sale included a $5.8 million nonperforming construction loan. The fair value of this loan was measured based on the estimated sale price of the loan and is classified within Level 2 in the fair value hierarchy.

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.

Contingent Consideration Liability

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

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The following table presents the assets and liabilities measured at fair value on a recurring basis at ~~March 31,~~September 30, 2023 and December 31, 2022, classified using the fair value hierarchy:


		At March 31, 2023									At September 30, 2023
(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	$	—	$	2,297	$	—	$	2,297	State and political subdivisions	$	—	$	2,267	$	—	$	2,267
Residential mortgage-backed securities	Residential mortgage-backed securities	—		280,794		—		280,794		Residential mortgage-backed securities	—		249,165		—		249,165
Collateralized mortgage obligations	Collateralized mortgage obligations	—		2,271		—		2,271		Collateralized mortgage obligations	—		2,034		—		2,034
Corporate bonds	Corporate bonds	—		82,294		—		82,294		Corporate bonds	—		81,072		—		81,072
Total available-for-sale securities	Total available-for-sale securities	—		367,656		—		367,656		Total available-for-sale securities	—		334,538		—		334,538
Equity securities:	Equity securities:									Equity securities:
Equity securities - financial services industry	Equity securities - financial services industry	711		—		—		711		Equity securities - financial services industry	663		—		—		663
Money market mutual funds	Money market mutual funds	2,394		—		—		2,394		Money market mutual funds	3,391		—		—		3,391
Total equity securities	Total equity securities	3,105		—		—		3,105		Total equity securities	4,054		—		—		4,054

Loans held for sale	Loans held for sale	—		5,425		—		5,425		Loans held for sale	—		16,473		—		16,473

Interest rate locks with customers*	Interest rate locks with customers*	—		265		—		265		Interest rate locks with customers*	—		136		—		136

Forward loan sale commitments*										Forward loan sale commitments*	—		148		—		148
Total assets	Total assets	$	3,105	$	373,346	$	—	$	376,451	Total assets	$	4,054	$	351,295	$	—	$	355,349
Liabilities:	Liabilities:									Liabilities:
Contingent consideration liability	Contingent consideration liability	$	—	$	—	$	1,154	$	1,154	Contingent consideration liability	$	—	$	—	$	1,203	$	1,203
Interest rate swaps*	Interest rate swaps*	—		6,282		—		6,282		Interest rate swaps*	—		11,374		—		11,374
Credit derivatives*	Credit derivatives*	—		—		330		330		Credit derivatives*	—		—		167		167

Forward loan sale commitments*		—		6		—		6

Total liabilities	Total liabilities	$	—	$	6,288	$	1,484	$	7,772	Total liabilities	$	—	$	11,374	$	1,370	$	12,744

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

The ~~$330~~$167 thousand of credit derivatives liability represented the Credit Valuation Adjustment (CVA), which is obtained from real-time financial market data, of ~~124~~137 interest rate swaps with a notional amount of ~~$792.8~~$880.9 million. The ~~March 31,~~September 30, 2023 CVA ~~assumed~~is calculated using a ~~zero-deal recovery percentage based~~40% loss given default rate on the most recent ~~index credit curve.~~investment grade curve calculated by a third party.

The contingent consideration liability resulting from the Sheaffer acquisition was ~~$1.6 million, which was~~ calculated using a discount rate of 8.3%. on the acquisition date. During the nine months ended September 30, 2023, the Corporation paid $635 thousand in contingent consideration related to this acquisition. The contingent consideration liability was $1.2 million at September 30, 2023. The remaining potential cash payments that could result from the contingent consideration arrangement for the Sheaffer acquisition range from $0 to a maximum of ~~$1.9~~$1.3 million ~~over~~through the ~~three-year~~ period ending November 30, 2024.

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	At December 31, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
Assets:
Available-for-sale securities:


State and political subdivisions	$	—	$	2,285	$	—	$	2,285
Residential mortgage-backed securities	—		263,388		—		263,388
Collateralized mortgage obligations	—		2,322		—		2,322
Corporate bonds	—		82,261		—		82,261
Total available-for-sale securities	—		350,256		—		350,256
Equity securities:
Equity securities - financial services industry	780		—		—		780
Money market mutual funds	1,799		—		—		1,799
Total equity securities	2,579		—		—		2,579

Loans held for sale	—		5,037		—		5,037
Interest rate locks with customers*	—		119		—		119
Forward loan sale commitments*	—		29		—		29
Total assets	$	2,579	$	355,441	$	—	$	358,020
Liabilities:
Contingent consideration liability	$	—	$	—	$	1,765	$	1,765
Interest rate swaps*	—		8,647		—		8,647
Credit derivatives*	—		—		360		360

Total liabilities	$	—	$	8,647	$	2,125	$	10,772

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

The $360 thousand of credit derivatives liability represented the CVA, which is obtained from real-time financial market data, of 127 interest rate swaps with a notional amount of $815.5 million. The December 31, 2022 CVA assumed a zero-deal recovery percentage based on the most recent index credit curve.

The contingent consideration liability resulting from the Sheaffer acquisition was $1.6 million, which was calculated using a discount rate of 8.3%. The potential cash payments that could result from the contingent consideration arrangement for the Sheaffer acquisition range from $0 to a maximum of $1.9 million over the three-year period ending November 30, 2024.

The following table includes a roll forward of 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, 2023 and 2022:


		Three Months Ended March 31, 2023								Nine Months Ended September 30, 2023
(Dollars in thousands)	(Dollars in thousands)	Balance at December 31, 2022		Additions		Payments received		Increase in value			Balance at March 31, 2023		(Dollars in thousands)	Balance at December 31, 2022		Additions		Payments received		Increase in value		Balance at September 30, 2023

Credit derivatives	Credit derivatives	(360)		(57)		—		87			(330)		Credit derivatives	$	(360)	$	(973)	$	—	$	1,166	$	(167)
Net total	Net total	$	(360)	$	(57)	$	—	$	87		$	(330)	Net total	$	(360)	$	(973)	$	—	$	1,166	$	(167)


		Three Months Ended March 31, 2022						Nine Months Ended September 30, 2022
(Dollars in thousands)	(Dollars in thousands)	Balance at December 31, 2021		Additions		Payments received			Increase (decrease) in value		Balance at March 31, 2022		(Dollars in thousands)	Balance at December 31, 2021		Additions		Payments received		Increase in value		Balance at September 30, 2022

Loans	Loans	48		—		(35)			—		13		Loans	$	48	$	—	$	(48)	$	—	$	—
Credit derivatives	Credit derivatives	(381)		(526)		—			450		(457)		Credit derivatives	(381)		(1,332)		—		1,355		(358)
Net total	Net total	$	(333)	$	(526)	$	(35)		$	450	$	(444)	Net total	$	(333)	$	(1,332)	$	(48)	$	1,355	$	(358)

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The following table presents the change in the balance of the contingent consideration liability related to acquisitions for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022:


		Three Months Ended March 31, 2023						Nine Months Ended September 30, 2023
(Dollars in thousands)	(Dollars in thousands)	Balance at December 31, 2022		Payment of Contingent Consideration		Adjustment of Contingent Consideration			Balance at March 31, 2023		(Dollars in thousands)	Balance at December 31, 2022		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at September 30, 2023
Paul I. Sheaffer Insurance Agency	Paul I. Sheaffer Insurance Agency	$	1,765	$	635	$	24		$	1,154	Paul I. Sheaffer Insurance Agency	$	1,765	$	635	$	73	$	1,203
Total contingent consideration liability	Total contingent consideration liability	$	1,765	$	635	$	24		$	1,154	Total contingent consideration liability	$	1,765	$	635	$	73	$	1,203


		Three Months Ended March 31, 2022						Nine Months Ended September 30, 2022
(Dollars in thousands)	(Dollars in thousands)	Balance at December 31, 2021		Payment of Contingent Consideration		Adjustment of Contingent Consideration			Balance at March 31, 2022		(Dollars in thousands)	Balance at December 31, 2021		Payment of Contingent Consideration		Adjustment of Contingent Consideration		Balance at September 30, 2022
Paul I. Sheaffer Insurance Agency	Paul I. Sheaffer Insurance Agency	$	1,629	$	—	$	34		$	1,663	Paul I. Sheaffer Insurance Agency	$	1,629	$	—	$	105	$	1,734
Total contingent consideration liability	Total contingent consideration liability	$	1,629	$	—	$	34		$	1,663	Total contingent consideration liability	$	1,629	$	—	$	105	$	1,734

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, 2023 and December 31, 2022:


		At March 31, 2023									At September 30, 2023
(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	$	—	$	—	$	10,389	$	10,389	Individually analyzed loans held for investment	$	—	$	—	$	11,718	$	11,718

Other real estate owned	Other real estate owned	—		—		19,000		19,000		Other real estate owned	—		—		19,916		19,916
Total	Total	$	—	$	—	$	29,389	$	29,389	Total	$	—	$	—	$	31,634	$	31,634


	At December 31, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Assets at Fair Value
Individually analyzed loans held for investment	$	—	$	—	$	10,586	$	10,586

Other real estate owned	—		—		19,258		19,258
Total	$	—	$	—	$	29,844	$	29,844

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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, 2023 and December 31, 2022. The disclosed fair values are classified using the fair value hierarchy.


		At March 31, 2023											At September 30, 2023
(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	$	138,324	$	—	$	—	$	138,324	$	138,324	Cash and short-term interest-earning assets	$	290,341	$	—	$	—	$	290,341	$	290,341

Held-to-maturity securities	Held-to-maturity securities	—		133,147		—		133,147		151,347		Held-to-maturity securities	—		123,760		—		123,760		149,451
Federal Home Loan Bank, Federal Reserve Bank and other stock	Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		43,792		Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		42,417
Net loans and leases held for investment	Net loans and leases held for investment	—		—		6,097,345		6,097,345		6,149,381		Net loans and leases held for investment	—		—		6,213,204		6,213,204		6,479,403
Servicing rights	Servicing rights	—		—		16,827		16,827		8,460		Servicing rights	—		—		18,963		18,963		8,921
Total assets	Total assets	$	138,324	$	133,147	$	6,114,172	$	6,385,643	$	6,491,304	Total assets	$	290,341	$	123,760	$	6,232,167	$	6,646,268	$	6,970,533
Liabilities:	Liabilities:											Liabilities:
Deposits:	Deposits:											Deposits:
Demand and savings deposits, non-maturity	Demand and savings deposits, non-maturity	$	5,188,330	$	—	$	—	$	5,188,330	$	5,188,330	Demand and savings deposits, non-maturity	$	5,270,646	$	—	$	—	$	5,270,646	$	5,270,646
Time deposits	Time deposits	—		637,072		—		637,072		646,327		Time deposits	—		1,153,897		—		1,153,897		1,168,519
Total deposits	Total deposits	5,188,330		637,072		—		5,825,402		5,834,657		Total deposits	5,270,646		1,153,897		—		6,424,543		6,439,165
Short-term borrowings	Short-term borrowings	—		271,881		—		271,881		271,881		Short-term borrowings	—		14,676		—		14,676		14,676
Long-term debt	Long-term debt	—		220,903		—		220,903		220,000		Long-term debt	—		316,366		—		316,366		320,000
Subordinated notes	Subordinated notes	—		141,250		—		141,250		148,385		Subordinated notes	—		135,000		—		135,000		148,636
Total liabilities	Total liabilities	$	5,188,330	$	1,271,106	$	—	$	6,459,436	$	6,474,923	Total liabilities	$	5,270,646	$	1,619,939	$	—	$	6,890,585	$	6,922,477


	At December 31, 2022
(Dollars in thousands)	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets:
Cash and short-term interest-earning assets	$	152,799	$	—	$	—	$	152,799	$	152,799
Held-to-maturity securities	—		134,068		—		134,068		154,727
Federal Home Loan Bank, Federal Reserve Bank and other stock	NA		NA		NA		NA		33,841
Net loans and leases held for investment	—		—		5,912,050		5,912,050		6,033,640
Servicing rights	—		—		16,826		16,826		8,572
Total assets	$	152,799	$	134,068	$	5,928,876	$	6,215,743	$	6,383,579
Liabilities:
Deposits:
Demand and savings deposits, non-maturity	$	5,394,442	$	—	$	—	$	5,394,442	$	5,394,442
Time deposits	—		503,576		—		503,576		519,084
Total deposits	5,394,442		503,576		—		5,898,018		5,913,526
Short-term borrowings	—		197,141		—		197,141		197,141
Long-term debt	—		91,926		—		91,926		95,000
Subordinated notes	—		147,250		—		147,250		148,260
Total liabilities	$	5,394,442	$	939,893	$	—	$	6,334,335	$	6,353,927

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

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

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

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

Loans held for sale: Loans held for sale are carried at the lower of cost or estimated fair value. The fair value of the Corporation’s mortgage loans held for sale are generally determined using a pricing model based on current market information obtained from external sources, including interest rates, bids or indications provided by market participants on specific loans that are actively marketed for sale. These loans are primarily residential mortgage loans and are generally classified in Level 2 due to the observable pricing data. At September 30, 2023, loans held for sale also included a $5.8 million nonperforming loan. The fair value of this loan was measured based on the estimated sale price of the loan and is classified within Level 2 in the fair value hierarchy.

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

Individually analyzed loans and leases held for investment: For individually analyzed loans and leases, the Corporation uses a variety of techniques to measure fair value, such as using the current appraised value of the collateral, agreements of sale, discounting the contractual cash flows, and analyzing market data that the Corporation may adjust due to specific characteristics of the loan/lease or collateral. At ~~March 31,~~September 30, 2023, individually analyzed loans held for investment had a carrying amount of ~~$11.3~~$12.6 million with a valuation allowance of ~~$912~~$834 thousand. At December 31, 2022, individually analyzed loans held for investment had a carrying amount of $13.4 million with a valuation allowance of $2.8 million. The Corporation had no individually analyzed leases at ~~March 31,~~September 30, 2023 or December 31, 2022.

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, 2023, servicing rights had a net carrying amount of ~~$8.5~~$8.9 million, which included a valuation allowance of ~~$40~~$12 thousand. At December 31, 2022, servicing rights had a net carrying amount of $8.6 million, which included a valuation allowance of $5 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, 2023, 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. At ~~March 31,~~September 30, 2023 and December 31, 2022, OREO had a carrying amount of ~~$19.0~~$19.9 million and $19.3 million, respectively. During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, one ~~commercial real estate~~ property was transferred to OREO with a carrying value of ~~$257~~ $79

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thousand ~~was sold.~~and an additional property had $558 thousand of capitalized improvements. Other real estate owned is classified within Level 3 in the fair value hierarchy based on appraisals, letters of intent or agreement of sale received from third parties.

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, 2023, the Corporation had three 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, 2023		At December 31, 2022		At March 31, 2022		(Dollars in thousands)	At September 30, 2023		At December 31, 2022		At September 30, 2022
Banking	Banking	$	7,238,593	$	7,104,727	$	6,997,081	Banking	$	7,706,141	$	7,104,727	$	6,793,567
Wealth Management	Wealth Management	59,127		58,239		53,174		Wealth Management	57,845		58,239		55,771
Insurance	Insurance	46,059		44,728		42,240		Insurance	47,507		44,728		43,547
Other	Other	15,212		14,322		15,245		Other	16,573		14,322		14,512
Consolidated assets	Consolidated assets	$	7,358,991	$	7,222,016	$	7,107,740	Consolidated assets	$	7,828,066	$	7,222,016	$	6,907,397

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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, 2023 and 2022.


		Three Months Ended											Three Months Ended
		March 31, 2023											September 30, 2023
(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	$	83,224	$	20	$	—	$	9	$	83,253	Interest income	$	97,079	$	18	$	—	$	9	$	97,106
Interest expense	Interest expense	20,676		979		—		2,281		23,936		Interest expense	41,235		—		—		2,281		43,516
Net interest income (expense)	Net interest income (expense)	62,548		(959)		—		(2,272)		59,317		Net interest income (expense)	55,844		18		—		(2,272)		53,590
Provision for credit losses	Provision for credit losses	3,387		—		—		—		3,387		Provision for credit losses	2,024		—		—		—		2,024
Noninterest income	Noninterest income	6,237		6,759		6,720		(36)		19,680		Noninterest income	6,950		6,803		4,912		26		18,691
Noninterest expense	Noninterest expense	39,932		4,860		3,935		802		49,529		Noninterest expense	39,299		5,130		3,987		572		48,988
Intersegment (revenue) expense*	Intersegment (revenue) expense*	(237)		115		122		—		—		Intersegment (revenue) expense*	(236)		114		122		—		—
Income (loss) before income taxes	Income (loss) before income taxes	25,703		825		2,663		(3,110)		26,081		Income (loss) before income taxes	21,707		1,577		803		(2,818)		21,269
Income tax expense (benefit)	Income tax expense (benefit)	5,185		164		583		(885)		5,047		Income tax expense (benefit)	4,452		284		185		(668)		4,253
Net income (loss)	Net income (loss)	$	20,518	$	661	$	2,080	$	(2,225)	$	21,034	Net income (loss)	$	17,255	$	1,293	$	618	$	(2,150)	$	17,016
Net capital expenditures	Net capital expenditures	$	2,201	$	3	$	56	$	325	$	2,585	Net capital expenditures	$	560	$	9	$	5	$	33	$	607


		Three Months Ended											Three Months Ended
		March 31, 2022											September 30, 2022
(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	$	51,189	$	1	$	—	$	8	$	51,198	Interest income	$	66,862	$	6	$	—	$	9	$	66,877
Interest expense	Interest expense	3,180		30		—		1,328		4,538		Interest expense	7,299		—		—		1,328		8,627
Net interest income (expense)	Net interest income (expense)	48,009		(29)		—		(1,320)		46,660		Net interest income (expense)	59,563		6		—		(1,319)		58,250
Reversal of provision for credit losses		(3,450)		—		—		—		(3,450)
Provision for credit losses												Provision for credit losses	3,558		—		—		—		3,558
Noninterest income	Noninterest income	7,370		7,305		5,764		31		20,470		Noninterest income	7,216		6,082		4,642		19		17,959
Noninterest expense	Noninterest expense	36,488		4,709		3,865		350		45,412		Noninterest expense	37,452		4,298		3,879		1,036		46,665
Intersegment (revenue) expense*	Intersegment (revenue) expense*	(433)		211		222		—		—		Intersegment (revenue) expense*	(432)		210		222		—		—
Income (loss) before income taxes	Income (loss) before income taxes	22,774		2,356		1,677		(1,639)		25,168		Income (loss) before income taxes	26,201		1,580		541		(2,336)		25,986
Income tax expense (benefit)	Income tax expense (benefit)	4,543		492		358		(542)		4,851		Income tax expense (benefit)	5,407		241		108		(571)		5,185
Net income (loss)	Net income (loss)	$	18,231	$	1,864	$	1,319	$	(1,097)	$	20,317	Net income (loss)	$	20,794	$	1,339	$	433	$	(1,765)	$	20,801
Net capital expenditures	Net capital expenditures	$	(5,592)	$	63	$	15	$	20	$	(5,494)	Net capital expenditures	$	1,128	$	269	$	15	$	171	$	1,583


	Nine Months Ended
	September 30, 2023
(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	270,422	$	49	$	—	$	27	$	270,498
Interest expense	96,417		—		—		6,844		103,261
Net interest income (expense)	174,005		49		—		(6,817)		167,237
Provision for credit losses	8,839		—		—		—		8,839
Noninterest income	21,139		20,246		16,846		(27)		58,204
Noninterest expense	119,984		14,790		11,877		1,665		148,316
Intersegment (revenue) expense*	(709)		344		365		—		—
Income (loss) before income taxes	67,030		5,161		4,604		(8,509)		68,286
Income tax expense (benefit)	13,913		580		1,015		(2,072)		13,436
Net income (loss)	$	53,117	$	4,581	$	3,589	$	(6,437)	$	54,850
Net capital expenditures	$	3,595	$	15	$	124	$	454	$	4,188

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	Nine Months Ended
	September 30, 2022
(Dollars in thousands)	Banking		Wealth Management		Insurance		Other		Consolidated
Interest income	$	174,758	$	8	$	—	$	26	$	174,792
Interest expense	14,428		—		—		3,983		18,411
Net interest income (expense)	160,330		8		—		(3,957)		156,381
Provision for credit losses	6,782		—		—		—		6,782
Noninterest income (expense)	22,066		20,249		15,234		(122)		57,427
Noninterest expense	112,119		13,398		11,626		2,305		139,448
Intersegment (revenue) expense*	(1,299)		632		667		—		—
Income (loss) before income taxes	64,794		6,227		2,941		(6,384)		67,578
Income tax expense (benefit)	13,038		1,169		612		(1,525)		13,294
Net income (loss)	$	51,756	$	5,058	$	2,329	$	(4,859)	$	54,284
Net capital expenditures	$	(3,944)	$	495	$	53	$	225	$	(3,171)

*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.

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

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

Forward-Looking Statements

The information contained in this report may contain forward-looking statements. When used or incorporated by reference in disclosure documents, the words "believe" "anticipate," "estimate," "expect," "project," "target," "goal" and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 certain risks, uncertainties and assumptions, including but not limited to those set forth below:

•Operating, legal and regulatory risks;

•Economic, political and competitive forces;

•General economic conditions, either nationally or in our market areas, that are worse than expected included as a result of employment levels and labor shortages, and the effect of inflation, a potential recession or slowed economic growth caused by supply chain disruptions or otherwise;

•Legislative, regulatory and accounting changes, including increased assessments by the Federal Deposit Insurance Corporation;

•Monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System;

•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;

•The effects of a government shutdown;

•Inflation or volatility in interest rates that reduce our margins and yields, the fair value of financial instruments or our level of loan originations or prepayments on loans we have made and make;

•Fluctuations in real estate values in our market area;

•A failure to maintain adequate levels of capital and liquidity to support our operations;

•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;

•Changes in the economic assumptions utilized to calculate the allowance for credit losses;

•Our ability to access cost-effective funding;

•Changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio;

•Our ability to implement our business strategies;

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

•Timing and amount of revenue and expenditures;

•Adverse changes in the securities markets;

•The impact of any military conflict, terrorist act or other geopolitical acts;

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

•Competition for loans, deposits and 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/or 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.

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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, 2022 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~~condition 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 2022 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											Three Months Ended										Nine Months Ended
		March 31,						Change				September 30,			Change						September 30,				Change
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2023			2022			Amount		Percent				(Dollars in thousands, except per share data)	2023			2022			Amount		Percent		2023			2022			Amount		Percent
Net income	Net income	$	21,034		$	20,317		$	717	3.5	%			Net income	$	17,016		$	20,801		$	(3,785)	(18.2)	%	$	54,850		$	54,284		$	566	1.0	%
Net income per share:	Net income per share:													Net income per share:
Basic	Basic	$	0.72		$	0.69		$	0.03	4.3				Basic	$	0.58		$	0.71		$	(0.13)	(18.3)		$	1.86		$	1.85		$	0.01	0.5
Diluted	Diluted	0.71			0.68			0.03		4.4				Diluted	0.58			0.71			(0.13)		(18.3)		1.86			1.84			0.02		1.1
Return on average assets	Return on average assets	1.18		%	1.17		%	1 BP		0.9				Return on average assets	0.88		%	1.21		%	(33 BP)		(27.3)		0.98		%	1.05		%	(7 BP)		(6.7)
Return on average equity	Return on average equity	10.81		%	10.64		%	17 BP		1.6				Return on average equity	8.32		%	10.67		%	(235 BP)		(22.0)		9.14		%	9.39		%	(25 BP)		(2.7)

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Results of Operations

Net Interest Income

Net interest income is the difference between interest earned primarily on loans, ~~and~~ leases and investment securities and interest paid on deposits, borrowings, long-term debt and subordinated notes. 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, 2023 and 2022. 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, 2023 versus 2022

Net interest income on a tax-equivalent basis for the three months ended ~~March 31,~~September 30, 2023 was ~~$59.7~~$53.9 million, ~~an increase~~a decrease of ~~$12.5~~$4.9 million, or ~~26.5%~~8.3%, compared to ~~$47.2~~$58.7 million for the three months ended ~~March 31,~~September 30, 2022. The ~~increase~~decrease in tax-equivalent net interest income for the three months ended ~~March 31,~~September 30, 2023 compared to the comparable period in the prior year was largely due to ~~significant loan~~increases in the cost of funds and the average balance ~~growth~~of interest-bearing liabilities, partially offset by increases in the yield and average balance of interest-earning assets. The increase in the yield on interest-earning assets and the cost of funds was primarily driven by the increase in market interest rates. The increase in the cost of funds also reflected a higher proportion of deposits in higher-costing certificates of deposit and money market savings accounts.

Net interest income on a tax-equivalent basis for the nine months ended September 30, 2023 was $168.2 million, an increase of $10.3 million, or 6.5%, compared to $157.9 million for the nine months ended September 30, 2022. The increase in tax-equivalent net interest income for the nine months ended September 30, 2023 compared to the comparable period in the prior year was largely due to an increase in average loan balances and asset yields, offset by increases in the average balance of ~~borrowings~~interest bearing liabilities and the cost of funds. The increase in the yield on interest-earning assets and the cost of funds was primarily driven by the increase in market interest rates. The increase in the cost of funds also reflected a higher proportion of deposits in higher-costing certificates of deposit and money market savings accounts.

The net interest margin, on a tax-equivalent basis, was ~~3.58%~~2.96% and 3.22% for the three and nine months ended ~~March 31,~~September 30, 2023, respectively, compared to ~~2.89%~~3.67% and 3.25% for the three and nine months ended ~~March 31, 2022. Excess liquidity had no impact on net interest margin for the three months ended March 31, 2023.~~September 30, 2022, respectively. Excess liquidity reduced net interest margin by approximately 33four and one basis points for the three and nine months ended ~~March 31, 2022. Excluding the impact of excess liquidity, the net interest margin, on a tax-equivalent~~September 30, 2023, respectively, and approximately one and 20 basis ~~was 3.22%~~points for the three and nine months ended ~~March 31, 2022.~~September 30, 2022, respectively.

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


		Three Months Ended March 31,															Three Months Ended September 30,
		2023							2022								2023							2022
(Dollars in thousands)	(Dollars in thousands)	Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate		(Dollars in thousands)	Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate
Assets:	Assets:															Assets:
Interest-earning deposits with other banks	Interest-earning deposits with other banks	$	47,835		$	479	4.06	%	$	733,173		$	357	0.20	%	Interest-earning deposits with other banks	$	143,109		$	1,865	5.17	%	$	49,476		$	252	2.02	%
U.S. government obligations	U.S. government obligations	—			—		—		5,222			26		2.02		U.S. government obligations	—			—		—		565			3		2.11
Obligations of states and political subdivisions*	Obligations of states and political subdivisions*	2,286			17		3.02		2,332			19		3.30		Obligations of states and political subdivisions*	2,281			16		2.78		2,308			18		3.09
Other debt and equity securities	Other debt and equity securities	513,594			3,495		2.76		514,574			2,339		1.84		Other debt and equity securities	504,060			3,540		2.79		514,462			3,010		2.32
Federal Home Loan Bank, Federal Reserve Bank and other stock	Federal Home Loan Bank, Federal Reserve Bank and other stock	34,742			609		7.11		27,115			355		5.31		Federal Home Loan Bank, Federal Reserve Bank and other stock	40,406			712		6.99		28,368			435		6.08
Total interest-earning deposits, investments and other interest-earning assets	Total interest-earning deposits, investments and other interest-earning assets	598,457			4,600		3.12		1,282,416			3,096		0.98		Total interest-earning deposits, investments and other interest-earning assets	689,856			6,133		3.53		595,179			3,718		2.48
Commercial, financial and agricultural loans	Commercial, financial and agricultural loans	991,876			15,538		6.35		919,957			8,162		3.60		Commercial, financial and agricultural loans	995,355			17,545		6.99		981,303			12,036		4.87
Real estate—commercial and construction loans	Real estate—commercial and construction loans	3,342,199			42,421		5.15		2,904,602			25,820		3.61		Real estate—commercial and construction loans	3,552,709			49,548		5.53		3,105,821			34,100		4.36
Real estate—residential loans	Real estate—residential loans	1,408,292			15,730		4.53		1,116,356			9,882		3.59		Real estate—residential loans	1,543,360			18,270		4.70		1,256,509			12,492		3.94
Loans to individuals	Loans to individuals	27,254			449		6.68		25,799			238		3.74		Loans to individuals	26,538			525		7.85		27,197			381		5.56
Municipal loans and leases*	Municipal loans and leases*	229,955			2,341		4.13		242,508			2,434		4.07		Municipal loans and leases*	234,685			2,430		4.11		235,433			2,432		4.10
Lease financings	Lease financings	165,314			2,541		6.23		135,476			2,075		6.21		Lease financings	184,522			2,928		6.30		145,856			2,195		5.97
Gross loans and leases	Gross loans and leases	6,164,890			79,020		5.20		5,344,698			48,611		3.69		Gross loans and leases	6,537,169			91,246		5.54		5,752,119			63,636		4.39
Total interest-earning assets	Total interest-earning assets	6,763,347			83,620		5.01		6,627,114			51,707		3.16		Total interest-earning assets	7,227,025			97,379		5.35		6,347,298			67,354		4.21
Cash and due from banks	Cash and due from banks	58,035							53,698							Cash and due from banks	62,673							62,930
Allowance for credit losses, loans and leases	Allowance for credit losses, loans and leases	(79,977)							(72,067)							Allowance for credit losses, loans and leases	(83,827)							(72,355)
Premises and equipment, net	Premises and equipment, net	51,583							53,948							Premises and equipment, net	52,071							50,476
Operating lease right-of-use assets	Operating lease right-of-use assets	31,303							30,394							Operating lease right-of-use assets	31,647							30,740
Other assets	Other assets	394,920							354,893							Other assets	404,394							378,377
Total assets	Total assets	$	7,219,211						$	7,047,980						Total assets	$	7,693,983						$	6,797,466
Liabilities:	Liabilities:															Liabilities:
Interest-bearing checking deposits	Interest-bearing checking deposits	$	857,891		$	3,164	1.50	%	$	881,462		$	443	0.20	%	Interest-bearing checking deposits	$	1,070,063		$	6,703	2.49	%	$	881,395		$	1,251	0.56	%
Money market savings	Money market savings	1,489,129			11,081		3.02		1,542,581			904		0.24		Money market savings	1,645,210			17,850		4.30		1,246,795			3,709		1.18
Regular savings	Regular savings	985,716			669		0.28		1,021,550			238		0.09		Regular savings	828,672			861		0.41		1,086,191			302		0.11
Time deposits	Time deposits	566,308			3,422		2.45		473,589			1,306		1.12		Time deposits	1,140,622			11,668		4.06		416,539			1,189		1.13
Total time and interest-bearing deposits	Total time and interest-bearing deposits	3,899,044			18,336		1.91		3,919,182			2,891		0.30		Total time and interest-bearing deposits	4,684,567			37,082		3.14		3,630,920			6,451		0.70
Short-term borrowings	Short-term borrowings	240,318			2,728		4.60		17,636			2		0.05		Short-term borrowings	93,028			1,117		4.76		104,453			524		1.99
Long-term debt	Long-term debt	112,222			591		2.14		95,000			317		1.35		Long-term debt	320,000			3,036		3.76		95,000			324		1.35
Subordinated notes	Subordinated notes	148,319			2,281		6.24		98,911			1,328		5.45		Subordinated notes	148,568			2,281		6.09		99,065			1,328		5.32
Total borrowings	Total borrowings	500,859			5,600		4.53		211,547			1,647		3.16		Total borrowings	561,596			6,434		4.55		298,518			2,176		2.89
Total interest-bearing liabilities	Total interest-bearing liabilities	4,399,903			23,936		2.21		4,130,729			4,538		0.45		Total interest-bearing liabilities	5,246,163			43,516		3.29		3,929,438			8,627		0.87
Noninterest-bearing deposits	Noninterest-bearing deposits	1,935,371							2,065,633							Noninterest-bearing deposits	1,538,143							2,014,371
Operating lease liabilities	Operating lease liabilities	34,438							33,452							Operating lease liabilities	34,788							33,786
Accrued expenses and other liabilities	Accrued expenses and other liabilities	60,346							43,808							Accrued expenses and other liabilities	63,374							46,772
Total liabilities	Total liabilities	6,430,058							6,273,622							Total liabilities	6,882,468							6,024,367
Total interest-bearing liabilities and noninterest-bearing deposits ("Cost of Funds")	Total interest-bearing liabilities and noninterest-bearing deposits ("Cost of Funds")	6,335,274					1.53		6,196,362					0.30		Total interest-bearing liabilities and noninterest-bearing deposits ("Cost of Funds")	6,784,306					2.54		5,943,809					0.58
Shareholders’ Equity:	Shareholders’ Equity:															Shareholders’ Equity:
Common stock	Common stock	157,784							157,784							Common stock	157,784							157,784
Additional paid-in capital	Additional paid-in capital	300,293							298,975							Additional paid-in capital	299,575							299,135
Retained earnings and other equity	Retained earnings and other equity	331,076							317,599							Retained earnings and other equity	354,156							316,180
Total shareholders’ equity	Total shareholders’ equity	789,153							774,358							Total shareholders’ equity	811,515							773,099
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	7,219,211						$	7,047,980						Total liabilities and shareholders’ equity	$	7,693,983						$	6,797,466
Net interest income	Net interest income				$	59,684						$	47,169			Net interest income				$	53,863						$	58,727
Net interest spread	Net interest spread						2.80							2.71		Net interest spread						2.06							3.34
Effect of net interest-free funding sources	Effect of net interest-free funding sources						0.78							0.18		Effect of net interest-free funding sources						0.90							0.33
Net interest margin	Net interest margin						3.58	%						2.89	%	Net interest margin						2.96	%						3.67	%
Ratio of average interest-earning assets to average interest-bearing liabilities	Ratio of average interest-earning assets to average interest-bearing liabilities	153.72		%					160.43		%					Ratio of average interest-earning assets to average interest-bearing liabilities	137.76		%					161.53		%

*Obligations of states and political subdivisions and municipal loans and leases are tax-exempt earning assets.

Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.

Net interest income includes net deferred costs amortization of ~~$465~~$563 thousand and ~~$136~~$498 thousand for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively.

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, 2023 and 2022 have been calculated using the Corporation's federal applicable rate of 21%.

4248

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	Nine Months Ended September 30,
	2023							2022
(Dollars in thousands)	Average Balance			Income/ Expense		Average Rate		Average Balance			Income/ Expense		Average Rate
Assets:
Interest-earning deposits with other banks	$	79,630		$	2,856	4.80	%	$	416,466		$	1,433	0.46	%
U.S. government obligations	—			—		—		2,578			40		2.07
Obligations of states and political subdivisions*	2,284			48		2.81		2,314			54		3.12
Other debt and equity securities	511,420			10,547		2.76		513,491			8,076		2.10
Federal Home Loan Bank, Federal Reserve Bank and other stock	39,664			2,102		7.09		27,239			1,134		5.57
Total interest-earning deposits, investments and other interest-earning assets	632,998			15,553		3.29		962,088			10,737		1.49
Commercial, financial and agricultural loans	997,590			50,002		6.70		949,141			29,390		4.14
Real estate—commercial and construction loans	3,447,551			137,929		5.35		3,005,714			88,447		3.93
Real estate—residential loans	1,478,871			51,216		4.63		1,180,202			33,132		3.75
Loans to individuals	26,859			1,453		7.23		26,598			924		4.64
Municipal loans and leases*	233,211			7,159		4.10		237,928			7,270		4.09
Lease financings	175,416			8,128		6.20		141,041			6,375		6.04
Gross loans and leases	6,359,498			255,887		5.38		5,540,624			165,538		3.99
Total interest-earning assets	6,992,496			271,440		5.19		6,502,712			176,275		3.62
Cash and due from banks	59,811							57,455
Allowance for credit losses, loans and leases	(81,829)							(70,950)
Premises and equipment, net	52,067							51,551
Operating lease right-of-use assets	31,384							30,453
Other assets	399,141							363,810
Total assets	$	7,453,070						$	6,935,031
Liabilities:
Interest-bearing checking deposits	$	980,725		$	15,259	2.08	%	$	871,393		$	2,264	0.35	%
Money market savings	1,532,318			43,020		3.75		1,397,220			6,165		0.59
Regular savings	900,448			2,375		0.35		1,059,644			777		0.10
Time deposits	845,635			22,231		3.51		447,497			3,722		1.11
Total time and interest-bearing deposits	4,259,126			82,885		2.60		3,775,754			12,928		0.46
Short-term borrowings	195,606			7,094		4.85		46,765			537		1.54
Long-term debt	245,366			6,438		3.51		95,000			962		1.35
Subordinated notes	148,444			6,844		6.16		98,989			3,984		5.38
Total borrowings	589,416			20,376		4.62		240,754			5,483		3.04
Total interest-bearing liabilities	4,848,542			103,261		2.85		4,016,508			18,411		0.61
Noninterest-bearing deposits	1,709,533							2,067,428
Operating lease liabilities	34,548							33,514
Accrued expenses and other liabilities	57,906							44,630
Total liabilities	6,650,529							6,162,080
Total interest-bearing liabilities and noninterest-bearing deposits ("Cost of Funds")	6,558,075					2.11		6,083,936					0.40
Shareholders’ Equity:
Common stock	157,784							157,784
Additional paid-in capital	299,550							298,784
Retained earnings and other equity	345,207							316,383
Total shareholders’ equity	802,541							772,951
Total liabilities and shareholders’ equity	$	7,453,070						$	6,935,031
Net interest income				$	168,179						$	157,864
Net interest spread						2.34							3.01
Effect of net interest-free funding sources						0.88							0.24
Net interest margin						3.22	%						3.25	%
Ratio of average interest-earning assets to average interest-bearing liabilities	144.22		%					161.90		%

*Obligations of states and political subdivisions and municipal loans and leases are tax-exempt earning assets.

Notes: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.

Net interest income includes net deferred costs amortization of $1.7 million and $1.3 million for the nine months ended September 30, 2023 and 2022, respectively.

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, 2023 and 2022 have been calculated using the Corporation's federal applicable rate of 21%.

Table of Contents

Table 2—Analysis of Changes in Net Interest Income

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


		Three Months Ended						Three Months Ended				Nine Months Ended
		March 31, 2023 Versus 2022						September 30, 2023 Versus 2022				September 30, 2023 Versus 2022
(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	$	(639)	$	761	$	122		Interest-earning deposits with other banks	$	884	$	729	$	1,613	$	(2,023)	$	3,446	$	1,423
U.S. government obligations	U.S. government obligations	(26)		—		(26)			U.S. government obligations	(3)		—		(3)		(40)		—		(40)
Obligations of states and political subdivisions	Obligations of states and political subdivisions	—		(2)		(2)			Obligations of states and political subdivisions	—		(2)		(2)		(1)		(5)		(6)
Other debt and equity securities	Other debt and equity securities	(4)		1,160		1,156			Other debt and equity securities	(63)		593		530		(33)		2,504		2,471
Federal Home Loan Bank, Federal Reserve Bank and other stock	Federal Home Loan Bank, Federal Reserve Bank and other stock	115		139		254			Federal Home Loan Bank, Federal Reserve Bank and other stock	205		72		277		606		362		968
Interest on deposits, investments and other earning assets	Interest on deposits, investments and other earning assets	(554)		2,058		1,504			Interest on deposits, investments and other earning assets	1,023		1,392		2,415		(1,491)		6,307		4,816
Commercial, financial and agricultural loans	Commercial, financial and agricultural loans	684		6,692		7,376			Commercial, financial and agricultural loans	175		5,334		5,509		1,572		19,040		20,612
Real estate—commercial and construction loans	Real estate—commercial and construction loans	4,332		12,269		16,601			Real estate—commercial and construction loans	5,392		10,056		15,448		14,309		35,173		49,482
Real estate—residential loans	Real estate—residential loans	2,922		2,926		5,848			Real estate—residential loans	3,132		2,646		5,778		9,383		8,701		18,084
Loans to individuals	Loans to individuals	14		197		211			Loans to individuals	(9)		153		144		9		520		529
Municipal loans and leases	Municipal loans and leases	(128)		35		(93)			Municipal loans and leases	(8)		6		(2)		(131)		20		(111)
Lease financings	Lease financings	459		7		466			Lease financings	607		126		733		1,581		172		1,753
Interest and fees on loans and leases	Interest and fees on loans and leases	8,283		22,126		30,409			Interest and fees on loans and leases	9,289		18,321		27,610		26,723		63,626		90,349
Total interest income	Total interest income	7,729		24,184		31,913			Total interest income	10,312		19,713		30,025		25,232		69,933		95,165
Interest expense:	Interest expense:								Interest expense:
Interest-bearing checking deposits	Interest-bearing checking deposits	(12)		2,733		2,721			Interest-bearing checking deposits	318		5,134		5,452		321		12,674		12,995
Money market savings	Money market savings	(33)		10,210		10,177			Money market savings	1,525		12,616		14,141		653		36,202		36,855
Regular savings	Regular savings	(9)		440		431			Regular savings	(86)		645		559		(134)		1,732		1,598
Time deposits	Time deposits	299		1,817		2,116			Time deposits	4,205		6,274		10,479		5,395		13,114		18,509
Total time and interest-bearing deposits	Total time and interest-bearing deposits	245		15,200		15,445			Total time and interest-bearing deposits	5,962		24,669		30,631		6,235		63,722		69,957
Short-term borrowings	Short-term borrowings	327		2,399		2,726			Short-term borrowings	(63)		656		593		3,913		2,644		6,557
Long-term debt	Long-term debt	65		209		274			Long-term debt	1,547		1,165		2,712		2,723		2,753		5,476
Subordinated notes	Subordinated notes	738		215		953			Subordinated notes	739		214		953		2,217		643		2,860
Interest on borrowings	Interest on borrowings	1,130		2,823		3,953			Interest on borrowings	2,223		2,035		4,258		8,853		6,040		14,893
Total interest expense	Total interest expense	1,375		18,023		19,398			Total interest expense	8,185		26,704		34,889		15,088		69,762		84,850
Net interest income	Net interest income	$	6,354	$	6,161	$	12,515		Net interest income	$	2,127	$	(6,991)	$	(4,864)	$	10,144	$	171	$	10,315

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Provision for Credit Losses

The provision for credit losses for the three months ended ~~March 31,~~September 30, 2023 and 2022 was ~~$3.4~~$2.0 million ~~compared to a reversal of~~and $3.6 million, respectively. The provision for credit losses ~~of $3.5 million~~ for the ~~three~~nine months ended ~~March 31, 2022.~~September 30, 2023 and 2022 was $8.8 million and $6.8 million, respectively. The following table details information pertaining to the Corporation’s allowance for credit losses on loans and leases as a percentage of loans and leases held for investment at the dates indicated.


(Dollars in thousands)	(Dollars in thousands)	March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022			December 31, 2021			(Dollars in thousands)	September 30, 2023			June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
Allowance for credit losses, loans and leases	Allowance for credit losses, loans and leases	$	80,034		$	79,004		$	74,929		$	72,011		$	68,286		$	71,924		Allowance for credit losses, loans and leases	$	83,837		$	82,709		$	80,034		$	79,004		$	74,929		$	72,011
Loans and leases held for investment	Loans and leases held for investment	6,239,804			6,123,230			5,849,259			5,661,777			5,400,786			5,310,017			Loans and leases held for investment	6,574,958			6,462,238			6,239,804			6,123,230			5,849,259			5,661,777
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	1.28		%	1.29		%	1.28		%	1.27		%	1.26		%	1.35		%	Allowance for credit losses, loans and leases / loans and leases held for investment	1.28		%	1.28		%	1.28		%	1.29		%	1.28		%	1.27		%

Noninterest Income

The following table presents noninterest income for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022:


		Three Months Ended									Three Months Ended								Nine Months Ended
		March 31,				Change				September 30,			Change				September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2023		2022		Amount		Percent				(Dollars in thousands)	2023		2022		Amount		Percent		2023		2022		Amount		Percent
Trust fee income	Trust fee income	$	1,955	$	2,102	$	(147)	(7.0	%)			Trust fee income	$	1,910	$	1,835	$	75	4.1	%	$	5,789	$	5,935	$	(146)	(2.5	%)
Service charges on deposit accounts	Service charges on deposit accounts	1,547		1,504		43		2.9				Service charges on deposit accounts	1,816		1,522		294		19.3		5,088		4,600		488		10.6
Investment advisory commission and fee income	Investment advisory commission and fee income	4,752		5,152		(400)		(7.8)				Investment advisory commission and fee income	4,843		4,199		644		15.3		14,303		14,163		140		1.0
Insurance commission and fee income	Insurance commission and fee income	6,487		5,570		917		16.5				Insurance commission and fee income	4,852		4,442		410		9.2		16,447		14,641		1,806		12.3
Other service fee income	Other service fee income	3,076		2,756		320		11.6				Other service fee income	3,020		3,124		(104)		(3.3)		9,414		9,189		225		2.4
Bank owned life insurance income	Bank owned life insurance income	767		699		68		9.7				Bank owned life insurance income	806		1,153		(347)		(30.1)		2,362		2,557		(195)		(7.6)
Net gain on sales of investment securities	Net gain on sales of investment securities	—		30		(30)		N/M				Net gain on sales of investment securities	—		—		—		N/A		—		30		(30)		N/M
Net gain on mortgage banking activities	Net gain on mortgage banking activities	625		1,929		(1,304)		(67.6)				Net gain on mortgage banking activities	1,216		817		399		48.8		2,880		3,976		(1,096)		(27.6)

Other income	Other income	471		728		(257)		(35.3)				Other income	228		867		(639)		(73.7)		1,921		2,336		(415)		(17.8)
Total noninterest income	Total noninterest income	$	19,680	$	20,470	$	(790)	(3.9	%)			Total noninterest income	$	18,691	$	17,959	$	732	4.1	%	$	58,204	$	57,427	$	777	1.4	%

Three and nine months ended ~~March 31,~~September 30, 2023 versus 2022

Noninterest income for the three months ended ~~March 31,~~September 30, 2023 was ~~$19.7~~$18.7 million, ~~a decrease~~an increase of ~~$790~~$732 thousand, or ~~3.9%~~4.1%, from the three months ended ~~March 31,~~September 30, 2022. Noninterest income for the nine months ended September 30, 2023 was $58.2 million, an increase of $777 thousand, or 1.4%, from the nine months ended September 30, 2022.

~~The net gain on mortgage banking activities decreased $1.3 million,~~Investment advisory commission and fee income increased $644 thousand, or ~~67.6%~~15.3%, for the three months ended March 31, 2023 from the comparable period in the prior year. The decrease for the three months ended March 31, 2023 was primarily due to a decrease in loan sales and a contraction of gain on sale margins due to the higher interest rate environment in 2023. Investment advisory commission and fee income decreased $400 thousand, or 7.8%, for the three months ended March 31, 2023 from the comparable period in the prior year, primarily driven by reduced assets under management and supervision due to market volatility.

~~Insurance commission and fee income increased $917 thousand, or 16.5%, for the three months ended March 31,~~September 30, 2023 from the comparable period in the prior year primarily due to new customer relationships and appreciation of assets under management, as a majority of investment advisory fees are billed based on the prior quarter-end assets under management.

Insurance commission and fee income increased $410 thousand, or 9.2%, for the three months ended September 30, 2023 and $1.8 million, or 12.3%, for the nine months ended September 30, 2023 from the comparable periods in the prior year. The increases ~~in premiums~~were primarily due to increased revenue from commercial lines. In addition, the increase for ~~group life and health and commercial lines and~~the nine months ended September 30, 2023 included an increase in contingent commission income of ~~$651~~$592 thousand, which was ~~$1.8~~$1.9 million and ~~$1.2~~$1.3 million for the ~~quarters~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively. Contingent income is largely recognized in the first quarter of the year.

Net gain on mortgage banking activities increased $399 thousand, or 48.8%, for the three months ended September 30, 2023 and decreased $1.1 million, or 27.6%, for the nine months ended September 30, 2023 from the comparable periods in the prior year. The increase for the three months ended September 30, 2023 was due to increased volume, and the decrease for the

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nine months ended September 30, 2023 was due to a decrease in loan sales and a contraction of margins due to the higher interest rate environment in 2023.

Bank owned life insurance decreased $347 thousand, or 30.1%, for the three months ended September 30, 2023 and $195 thousand, or 7.6%, for the nine months ended September 30, 2023 from the comparable periods in the prior year, primarily due to a death benefit claim of $446 thousand received in the third quarter of 2022.

Other income decreased $639 thousand, or 73.7%, for the three months ended September 30, 2023 and $415 thousand, or 17.8%, for the nine months ended September 30, 2023 from the comparable periods in the prior year primarily due to a $412 thousand and $230 thousand decrease in the gain on sale of Small Business Administration loans for the respective periods due to less activity.

Noninterest Expense

The following table presents noninterest expense for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022:


		Three Months Ended									Three Months Ended								Nine Months Ended
		March 31,				Change				September 30,			Change				September 30,				Change
(Dollars in thousands)	(Dollars in thousands)	2023		2022		Amount		Percent				(Dollars in thousands)	2023		2022		Amount		Percent		2023		2022		Amount		Percent
Salaries, benefits and commissions	Salaries, benefits and commissions	$	31,014	$	28,245	$	2,769	9.8	%			Salaries, benefits and commissions	$	29,978	$	29,400	$	578	2.0	%	$	90,867	$	86,778	$	4,089	4.7	%
Net occupancy	Net occupancy	2,727		2,716		11		0.4				Net occupancy	2,594		2,504		90		3.6		7,935		7,642		293		3.8
Equipment	Equipment	993		982		11		1.1				Equipment	1,087		968		119		12.3		3,066		2,927		139		4.7
Data processing	Data processing	4,029		3,567		462		13.0				Data processing	4,189		3,901		288		7.4		12,355		11,176		1,179		10.5
Professional fees	Professional fees	1,941		2,138		(197)		(9.2)				Professional fees	1,763		2,521		(758)		(30.1)		5,373		7,503		(2,130)		(28.4)
Marketing and advertising	Marketing and advertising	371		425		(54)		(12.7)				Marketing and advertising	555		605		(50)		(8.3)		1,548		1,723		(175)		(10.2)
Deposit insurance premiums	Deposit insurance premiums	1,101		893		208		23.3				Deposit insurance premiums	1,258		662		596		90.0		3,475		2,367		1,108		46.8
Intangible expenses	Intangible expenses	253		341		(88)		(25.8)				Intangible expenses	220		309		(89)		(28.8)		726		992		(266)		(26.8)

Restructuring charges												Restructuring charges	—		—		—		N/A		1,330		—		1,330		N/M
Other expense	Other expense	7,100		6,105		995		16.3				Other expense	7,344		5,795		1,549		26.7		21,641		18,340		3,301		18.0
Total noninterest expense	Total noninterest expense	$	49,529	$	45,412	$	4,117	9.1	%			Total noninterest expense	$	48,988	$	46,665	$	2,323	5.0	%	$	148,316	$	139,448	$	8,868	6.4	%

Three and nine months ended ~~March 31,~~September 30, 2023 versus 2022

Noninterest expense for the three months ended ~~March 31,~~September 30, 2023 was ~~$49.5~~$49.0 million, an increase of ~~$4.1~~$2.3 million, or ~~9.1%~~5.0%, from the three months ended ~~March 31,~~September 30, 2022. Noninterest expense for the nine months ended September 30, 2023 was $148.3 million, an increase of $8.9 million, or 6.4%, from the nine months ended September 30, 2022.

Salaries, benefits and commissions increased ~~$2.8 million,~~$578 thousand, or ~~9.8%~~2.0%, for the three months ended ~~March 31,~~September 30, 2023 and $4.1 million, or 4.7%, for the nine months ended September 30, 2023 from the comparable ~~period~~periods in the prior year. ~~This increase reflects~~These increases reflect our expansion into Maryland and Western Pennsylvania and annual merit ~~increases. Additionally,~~increases, increases in medical claims and decreases in compensation capitalized ~~compensation decreased~~driven by ~~$429 thousand~~lower loan production, offset by decreases due to ~~reduced loan production~~the staff reduction that was announced during the ~~three months ended March 31, 2023.~~second quarter, and a reduction in incentive compensation due to decreased profitability.

~~Data processing expenses~~Deposit insurance premiums increased ~~$462~~$596 thousand, or ~~13.0%~~90.0%, for the three months ended ~~March 31,~~September 30, 2023 and $1.1 million, or 46.8%, for the nine months ended September 30, 2023 from the comparable ~~period~~periods in the prior year, primarily ~~due to~~driven by an increased industry-wide assessment rate and an increase in our ~~investments in technology in recent years~~assessment base.

Restructuring charges increased $1.3 million for the nine months ended September 30, 2023 as a result of the Corporation's financial service center optimization and ~~general price increases incurred in~~expense management strategies deployed during the second ~~half~~quarter of ~~2022.~~ 2023 in response to macroeconomic headwinds.

Other expense increased ~~$995 thousand,~~$1.5 million, or ~~16.3%~~26.7%, for the three months ended ~~March 31,~~September 30, 2023 and $3.3 million, or 18.0%, for the nine months ended September 30, 2023 from the comparable ~~period~~periods in the prior year, primarily due to increases in retirement plan costs of ~~$407~~$527 thousand ~~which was~~and $1.2 million, respectively. Other increases included $324 thousand and $769 thousand of loan processing and workout fees for the three and nine months ended September 30, 2023, respectively. Federal

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Home Loan Bank letter of credit fees increased by $138 thousand and $244 thousand for the three and nine months ended September 30, 2023, respectively, due to increases in public fund deposits and related collateral costs.

Professional fees decreased $758 thousand, or 30.1%, and $2.1 million, or 28.4%, for the three and nine months ended September 30, 2023 primarily ~~driven by~~due to consultant fees incurred in the ~~current interest rate environment, and Bank Shares tax expense~~second quarter of ~~$110 thousand driven by year over year growth of the Bank's Shareholders' Equity.~~2022 related to our digital transformation initiative.

Tax Provision

The Corporation recognized a tax expense of ~~$5.0~~$4.3 million and ~~$4.9~~$5.2 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, resulting in an effective rate of ~~19.4%~~20.0% for both periods. The Corporation recognized a tax expense of $13.4 million and ~~19.3%, respectively.~~$13.3 million for the nine months ended September 30, 2023 and 2022, respectively, resulting in an effective rate of 19.7% for both periods. The effective tax rates for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022 were favorably impacted by seven and eight basis points, respectively, of discrete tax benefits resulting from equity compensation awards vesting in the respective quarters. Additionally, the effective tax rates for the three months ended March 31, 2023 and 2022 reflectedreflects the benefits of tax-exempt income from investments in municipal securities and loans and leases. Additionally, the effective tax rate for the nine months ended September 30, 2022 was favorably impacted by discrete tax benefits and proceeds from BOLI death benefits.

Financial Condition

Assets

The following table presents assets at the dates indicated:


		At March 31, 2023		At December 31, 2022		Change					At September 30, 2023		At December 31, 2022		Change
(Dollars in thousands)	(Dollars in thousands)					Amount		Percent		(Dollars in thousands)					Amount		Percent
Cash, interest-earning deposits and federal funds sold	Cash, interest-earning deposits and federal funds sold	$	138,324	$	152,799	$	(14,475)	(9.5)	%	Cash, interest-earning deposits and federal funds sold	$	290,341	$	152,799	$	137,542	90.0	%
Investment securities	Investment securities	522,108		507,562		14,546		2.9		Investment securities	488,043		507,562		(19,519)		(3.8)
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	43,792		33,841		9,951		29.4		Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost	42,417		33,841		8,576		25.3
Loans held for sale	Loans held for sale	5,425		5,037		388		7.7		Loans held for sale	16,473		5,037		11,436		227.0
Loans and leases held for investment	Loans and leases held for investment	6,239,804		6,123,230		116,574		1.9		Loans and leases held for investment	6,574,958		6,123,230		451,728		7.4
Allowance for credit losses, loans and leases	Allowance for credit losses, loans and leases	(80,034)		(79,004)		(1,030)		1.3		Allowance for credit losses, loans and leases	(83,837)		(79,004)		(4,833)		6.1
Premises and equipment, net	Premises and equipment, net	52,334		50,939		1,395		2.7		Premises and equipment, net	51,287		50,939		348		0.7
Operating lease right-of-use assets	Operating lease right-of-use assets	31,663		30,059		1,604		5.3		Operating lease right-of-use assets	31,053		30,059		994		3.3
Goodwill and other intangibles, net	Goodwill and other intangibles, net	186,554		186,894		(340)		(0.2)		Goodwill and other intangibles, net	186,589		186,894		(305)		(0.2)
Bank owned life insurance	Bank owned life insurance	128,926		120,297		8,629		7.2		Bank owned life insurance	130,522		120,297		10,225		8.5

Accrued interest receivable and other assets	Accrued interest receivable and other assets	90,095		90,362		(267)		(0.3)		Accrued interest receivable and other assets	100,220		90,362		9,858		10.9
Total assets	Total assets	$	7,358,991	$	7,222,016	$	136,975	1.9	%	Total assets	$	7,828,066	$	7,222,016	$	606,050	8.4	%

Cash and Interest-Earning Deposits

Cash and interest-earning deposits ~~decreased $14.5~~increased $137.5 million, or ~~9.5%~~90.0%, from December 31, 2022, primarily due to ~~a decrease in cash letters~~increased interest earning deposits at the Federal Reserve Bank of $151.6 million due to increased long-term debt and ~~in clearing activity.~~deposit growth outpacing loan funding, offset by decreased borrowings.

Investment Securities

Total investment securities at ~~March 31,~~September 30, 2023 ~~increased $14.5~~decreased $19.5 million, or ~~2.9%~~3.8%, from December 31, 2022. Purchases of $19.7 million, primarily residential mortgage-backed securities, and increases in the fair value of available-for-sale investment securities of $5.7 million, were partially offset by maturitiesMaturities and pay-downs of ~~$9.7~~$34.8 million, net amortization of purchased premiums and discounts of $907 thousand, calls of $500 thousand, a provision for credit losses of ~~$292~~$397 thousand, ~~net amortization~~sales of ~~purchased premiums and discounts of $276~~$252 thousand and ~~sales~~and decreases in the fair value of ~~$10 thousand.~~available-for-sale investment securities of $10.0 million, which were partially offset by purchases of $27.4 million, which were primarily residential mortgage-backed securities.

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Loans and Leases Held for Sale

Gross loans and leases held for sale increased $11.4 million, or 227.0%, from December 31, 2022. During the third quarter of 2023, a $5.8 million nonperforming construction loan was transferred to held for sale and was sold on October 16, 2023.

Loans and Leases

Gross loans and leases held for investment increased ~~$116.6~~$451.7 million, or ~~1.9%~~7.4%, from December 31, 2022. The growth in gross loans and leases held for investment was primarily due to increases in commercial real estate, construction, residential mortgage loans and lease financings.

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

At ~~March 31,~~September 30, 2023, nonaccrual loans and leases were ~~$11.4~~$18.1 million and had a related allowance for credit losses on loans and leases of ~~$912~~$834 thousand. At December 31, 2022, nonaccrual loans and leases were $13.4 million and had a related allowance for credit losses on loans and leases of $2.8 million. During the ~~first~~second quarter of 2023, ~~$2.4~~a $5.8 million ~~of charge-offs were recorded against two existing~~construction loan was placed on nonaccrual status and a $2.5 million nonaccrual commercial ~~loans~~loan was paid off, with a related allowance of $448 thousand. Based on the value of the underlying collateral, an individual reserve was not recorded for the $5.8 million construction loan as of June 30, 2023. Subsequently, during the third quarter of 2023, the loan was transferred to ~~one borrower. As of December 31, 2022, the allowance~~held for

~~credit losses included a $2.1 million specific reserve for this relationship.~~ sale and was sold on October 16, 2023. 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. The amount of individual reserve needed for these credits could change in future periods subject to changes in facts and judgements related to these credits.

Net loan and lease charge-offs for the three months ended ~~March 31,~~September 30, 2023 were ~~$2.8~~$969 thousand compared to $1.2 million for the same period in the prior year. Net loan and lease charge-offs for the nine months ended September 30, 2023 were $4.3 million compared to ~~$76 thousand~~$3.0 million for the same period in the prior year. The increase in charge-offs isfor the nine months ended September 30, 2023 was primarily due to $2.4 million of charge-offs recorded against two existing nonaccrual commercial loans to one borrower in the ~~previously discussed charged-off~~first quarter of 2023. As of December 31, 2022, the allowance for credit losses included a $2.1 million individual reserve for this relationship.

Other real estate owned ("OREO") was ~~$19.0~~$19.9 million at ~~March 31,~~September 30, 2023 ~~and~~compared to $19.3 million at December 31, 2022, ~~respectively. The decrease of $258 thousand was related~~primarily due to capitalized improvements on an existing OREO property and the ~~sale~~transfer of a ~~commercial~~residential real estate property ~~which was transferred to other real estate owned in the third quarter~~with a carrying value of ~~2020.~~$79 thousand.

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Table 3—Nonaccrual and Past Due Loans and Leases; 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, 2023			At December 31, 2022			(Dollars in thousands)	At September 30, 2023			At December 31, 2022
Nonaccrual loans and leases		$	11,362		$	13,353
Nonaccrual loans held for sale								Nonaccrual loans held for sale	$	5,819		$	—
Nonaccrual loans and leases held for investment								Nonaccrual loans and leases held for investment	12,266			13,353
Accruing loans and leases, 90 days or more past due	Accruing loans and leases, 90 days or more past due	1,996			875			Accruing loans and leases, 90 days or more past due	2,135			875
Total nonperforming loans and leases	Total nonperforming loans and leases	$	13,358		$	14,228		Total nonperforming loans and leases	$	20,220		$	14,228
Other real estate owned	Other real estate owned	19,000			19,258			Other real estate owned	19,916			19,258
Total nonperforming assets	Total nonperforming assets	$	32,358		$	33,486		Total nonperforming assets	$	40,136		$	33,486

Loans and leases held for investment	Loans and leases held for investment	$	6,239,804		$	6,123,230		Loans and leases held for investment	$	6,574,958		$	6,123,230
Allowance for credit losses, loans and leases	Allowance for credit losses, loans and leases	80,034			79,004			Allowance for credit losses, loans and leases	83,837			79,004

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	1.28		%	1.29		%	Allowance for credit losses, loans and leases / loans and leases held for investment	1.28		%	1.29		%
Nonaccrual loans and leases / loans and leases held for investment	Nonaccrual loans and leases / loans and leases held for investment	0.18		%	0.22		%	Nonaccrual loans and leases / loans and leases held for investment	0.28		%	0.22		%
Allowance for credit losses, loans and leases / nonaccrual loans and leases	Allowance for credit losses, loans and leases / nonaccrual loans and leases	704.40		%	591.66		%	Allowance for credit losses, loans and leases / nonaccrual loans and leases	463.57		%	591.66		%

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


(Dollars in thousands)	(Dollars in thousands)	At March 31, 2023		At December 31, 2022		(Dollars in thousands)	At September 30, 2023		At December 31, 2022
Nonaccrual loans and leases		$	11,362	$	13,353
Nonaccrual loans and leases, held for investment						Nonaccrual loans and leases, held for investment	$	12,266	$	13,353
Nonaccrual loans and leases with partial charge-offs	Nonaccrual loans and leases with partial charge-offs	1,085		928		Nonaccrual loans and leases with partial charge-offs	702		928
Life-to-date partial charge-offs on nonaccrual loans and leases	Life-to-date partial charge-offs on nonaccrual loans and leases	727		448		Life-to-date partial charge-offs on nonaccrual loans and leases	519		448
Specific reserves on individually analyzed loans		912		2,765
Reserves on individually analyzed loans						Reserves on individually analyzed loans	834		2,765

4755

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Table 4—Loan Portfolio Overview

The following table provides summarized detail related to outstanding commercial loan balances ~~excluding PPP loans,~~ segmented by industry description as of ~~March 31,~~September 30, 2023:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2023				(Dollars in thousands)	September 30, 2023
Industry Description	Industry Description	Total Outstanding Balance		% of Commercial Loan Portfolio		Industry Description	Total Outstanding Balance		% of Commercial Loan Portfolio
CRE - Retail	CRE - Retail	$	443,932	8.8	%	CRE - Retail	$	466,862	8.9	%
Animal Production	Animal Production	341,832		6.8		Animal Production	359,814		6.8
CRE - Multi-family						CRE - Multi-family	304,289		5.8
CRE - Office	CRE - Office	308,583		6.1		CRE - Office	301,949		5.7
CRE - Multi-family		294,816		5.8
CRE - 1-4 Family Residential Investment	CRE - 1-4 Family Residential Investment	269,295		5.3		CRE - 1-4 Family Residential Investment	282,333		5.4
CRE - Industrial / Warehouse						CRE - Industrial / Warehouse	244,107		4.6
Hotels & Motels (Accommodation)	Hotels & Motels (Accommodation)	207,019		4.1		Hotels & Motels (Accommodation)	190,698		3.6
CRE - Industrial / Warehouse		199,372		4.0
Nursing and Residential Care Facilities	Nursing and Residential Care Facilities	165,160		3.3		Nursing and Residential Care Facilities	173,781		3.3
Specialty Trade Contractors						Specialty Trade Contractors	164,837		3.1
Education						Education	157,875		3.0
Homebuilding (tract developers, remodelers)	Homebuilding (tract developers, remodelers)	156,753		3.1		Homebuilding (tract developers, remodelers)	153,490		2.9
Education		155,441		3.1
Specialty Trade Contractors		149,939		3.0
Motor Vehicle and Parts Dealers						Motor Vehicle and Parts Dealers	134,118		2.5
Merchant Wholesalers, Durable Goods	Merchant Wholesalers, Durable Goods	128,837		2.6		Merchant Wholesalers, Durable Goods	125,105		2.4
Motor Vehicle and Parts Dealers		123,448		2.5
CRE - Mixed-Use - Residential	CRE - Mixed-Use - Residential	111,124		2.2		CRE - Mixed-Use - Residential	109,187		2.1
Crop Production	Crop Production	93,487		1.9		Crop Production	101,973		1.9
Repair and Maintenance						Repair and Maintenance	94,011		1.8
Private Equity & Special Purpose Entities (except 52592)						Private Equity & Special Purpose Entities (except 52592)	86,549		1.6
Administrative and Support Services	Administrative and Support Services	85,589		1.7		Administrative and Support Services	86,053		1.6
Rental and Leasing Services	Rental and Leasing Services	79,800		1.6		Rental and Leasing Services	82,213		1.6
Wood Product Manufacturing	Wood Product Manufacturing	78,939		1.6		Wood Product Manufacturing	81,813		1.6
Real Estate Lenders, Secondary Market Financing						Real Estate Lenders, Secondary Market Financing	79,310		1.5
CRE - Mixed-Use - Commercial	CRE - Mixed-Use - Commercial	78,628		1.6		CRE - Mixed-Use - Commercial	75,797		1.4
Real Estate Lenders, Secondary Market Financing		76,798		1.5
Religious Organizations, Advocacy Groups	Religious Organizations, Advocacy Groups	74,590		1.5		Religious Organizations, Advocacy Groups	73,665		1.4
Fabricated Metal Product Manufacturing	Fabricated Metal Product Manufacturing	70,896		1.4		Fabricated Metal Product Manufacturing	71,827		1.4
Personal and Laundry Services						Personal and Laundry Services	71,060		1.3
Amusement, Gambling, and Recreation Industries						Amusement, Gambling, and Recreation Industries	70,759		1.3
Merchant Wholesalers, Nondurable Goods	Merchant Wholesalers, Nondurable Goods	68,129		1.3		Merchant Wholesalers, Nondurable Goods	69,919		1.3
Miniwarehouse / Self-Storage						Miniwarehouse / Self-Storage	65,069		1.2
Food Services and Drinking Places	Food Services and Drinking Places	66,605		1.3		Food Services and Drinking Places	63,662		1.2
Food Manufacturing	Food Manufacturing	66,425		1.3		Food Manufacturing	59,897		1.1
Personal and Laundry Services		64,434		1.3
Amusement, Gambling, and Recreation Industries		61,295		1.2
Repair and Maintenance		56,749		1.1
Miniwarehouse / Self-Storage		56,336		1.1
Private Equity & Special Purpose Entities (excluding Trusts, Estates and Agency Accounts)		54,918		1.1
Truck Transportation	Truck Transportation	52,263		1.0		Truck Transportation	55,250		1.0
Industries with >$50 million in outstandings	Industries with >$50 million in outstandings	$	4,241,432	84.2	%	Industries with >$50 million in outstandings	$	4,457,272	84.6	%
Industries with <$50 million in outstandings	Industries with <$50 million in outstandings	$	794,605	15.8	%	Industries with <$50 million in outstandings	$	811,904	15.4	%
Total Commercial Loans	Total Commercial Loans	$	5,036,037	100.0	%	Total Commercial Loans	$	5,269,176	100.0	%

Consumer Loans and Lease Financings	Consumer Loans and Lease Financings	Total Outstanding Balance				Consumer Loans and Lease Financings	Total Outstanding Balance
Real Estate-Residential Secured for Personal Purpose	Real Estate-Residential Secured for Personal Purpose	$	779,557			Real Estate-Residential Secured for Personal Purpose	$	861,122
Real Estate-Home Equity Secured for Personal Purpose	Real Estate-Home Equity Secured for Personal Purpose	172,073				Real Estate-Home Equity Secured for Personal Purpose	176,855
Loans to Individuals	Loans to Individuals	28,656				Loans to Individuals	27,331
Lease Financings	Lease Financings	223,481				Lease Financings	240,474
Total Consumer Loans and Lease Financings	Total Consumer Loans and Lease Financings	$	1,203,767			Total Consumer Loans and Lease Financings	$	1,305,782

Total	Total	$	6,239,804			Total	$	6,574,958

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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, 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 core deposit and customer-related intangibles was $229 thousand and ~~$307~~$274 thousand for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. The amortization of core deposit and customer-related intangibles was $458 thousand and $888 thousand for the nine months ended September 30, 2023 and 2022, 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, 2023 and December 31, 2022.

The Corporation also has goodwill with a net carrying value of $175.5 million at ~~March 31,~~September 30, 2023 and December 31, 2022, 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, 2023 or 2022. There can be no assurance that future impairment assessments or tests will not result in a charge to earnings.

Bank Owned Life Insurance

The Bank purchases bank owned life insurance to protect itself against the loss of key employees due to death and to offset or finance the Corporation's future costs and obligations to employees under its benefits plans. Bank owned life insurance increased ~~$8.6~~$10.2 million, or ~~7.2%~~8.5%, from December 31, 2022, primarily due to $7.9 million of policies purchased during the first quarter of 2023.

Liabilities

The following table presents liabilities at the dates indicated:


(Dollars in thousands)	(Dollars in thousands)	At March 31, 2023		At December 31, 2022		Change				(Dollars in thousands)	At September 30, 2023		At December 31, 2022		Change
						Amount		Percent							Amount		Percent
Deposits	Deposits	$	5,834,657	$	5,913,526	$	(78,869)	(1.3	%)	Deposits	$	6,439,165	$	5,913,526	$	525,639	8.9	%
Short-term borrowings	Short-term borrowings	271,881		197,141		74,740		37.9		Short-term borrowings	14,676		197,141		(182,465)		(92.6)
Long-term debt	Long-term debt	220,000		95,000		125,000		131.6		Long-term debt	320,000		95,000		225,000		236.8
Subordinated notes	Subordinated notes	148,385		148,260		125		0.1		Subordinated notes	148,636		148,260		376		0.3
Operating lease liabilities	Operating lease liabilities	34,846		33,153		1,693		5.1		Operating lease liabilities	34,017		33,153		864		2.6
Accrued interest payable and other liabilities	Accrued interest payable and other liabilities	50,726		58,436		(7,710)		(13.2)		Accrued interest payable and other liabilities	64,374		58,436		5,938		10.2
Total liabilities	Total liabilities	$	6,560,495	$	6,445,516	$	114,979	1.8	%	Total liabilities	$	7,020,868	$	6,445,516	$	575,352	8.9	%

Deposits

Total deposits ~~decreased $78.9~~increased $525.6 million, or ~~1.3%~~8.9%, from December 31, 2022, primarily due to increases in brokered deposits and seasonal public funds deposits partially offset by decreases in commercial and consumer deposits. At September 30, 2023, noninterest bearing deposits ~~partially offset by increases in public funds~~represented 22.2% of total deposits, down from 34.6% at December 31, 2022. At September 30, 2023, unprotected deposits, which excludes insured, internal, and ~~brokered deposits.~~collateralized deposit accounts, represented 20.8% of total deposits, down from 31.0% at December 31, 2022.

Borrowings

Total borrowings increased ~~$199.9~~$42.9 million, or ~~45.4%~~9.7%, from December 31, 2022, due to increases of ~~$38.7~~$225.0 million in long-term debt, partially offset by decreases of $125.0 million in short-term FHLB overnight borrowings ~~$30.0~~and $60.0 million in federal funds ~~purchased and $6.0 million in short-term customer repurchase agreements. The funds were used to fund loan growth, purchase investment securities and to maintain liquidity.~~

~~Other Liabilities~~

~~Other liabilities decreased $7.7 million, or 13.2%, from December 31, 2022, due to the payment in the first quarter of $7.7 million in annual incentive payments that were previously accrued.~~purchased.

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Shareholders’ Equity

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


(Dollars in thousands)	(Dollars in thousands)	At March 31, 2023		At December 31, 2022		Change				(Dollars in thousands)	At September 30, 2023		At December 31, 2022		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	298,167		300,808		(2,641)		(0.9)		Additional paid-in capital	300,171		300,808		(637)		(0.2)
Retained earnings	Retained earnings	443,493		428,637		14,856		3.5		Retained earnings	464,634		428,637		35,997		8.4
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(55,550)		(62,104)		6,554		(10.6)		Accumulated other comprehensive loss	(71,586)		(62,104)		(9,482)		15.3
Treasury stock	Treasury stock	(45,398)		(48,625)		3,227		(6.6)		Treasury stock	(43,805)		(48,625)		4,820		(9.9)
Total shareholders’ equity	Total shareholders’ equity	$	798,496	$	776,500	$	21,996	2.8	%	Total shareholders’ equity	$	807,198	$	776,500	$	30,698	4.0	%

Total shareholders' equity increased ~~$22.0~~$30.7 million, or ~~2.8%~~4.0%, from December 31, 2022. Retained earnings at ~~March 31,~~September 30, 2023 increased by ~~$14.9~~$36.0 million primarily due to net income of ~~$21.0~~$54.9 million offset by ~~$6.2~~$18.5 million in cash dividends paid for the ~~three~~nine months ended ~~March 31,~~September 30, 2023. Accumulated other comprehensive loss ~~decreased~~increased by ~~$6.6~~$9.5 million, primarily attributable to ~~increases~~decreases in the fair value of available-for-sale investment securities of ~~$4.5~~$7.9 million, net of tax and ~~an increase~~a decrease in the fair value of derivatives of ~~$1.9~~$2.2 million, net of tax. Treasury stock decreased ~~$3.2~~$4.8 million from December 31, 2022 primarily due to stock issued under the dividend reinvestment and employee stock purchase plans and stock-based incentive plan activity.

Discussion of Segments

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

The Banking segment reported pre-tax income of ~~$25.7~~$21.7 million and ~~$22.8~~$26.2 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, and pre-tax income of $67.0 million and $64.8 million for the nine months ended September 30, 2023 and 2022, respectively. See the section of this ~~MD&A~~Management's Discussion & Analysis under the headings "Results of Operations" and "Financial Condition" for a discussion of key items impacting the Banking Segment.

The Wealth Management segment reported ~~pre-tax~~noninterest income of ~~$825 thousand~~$6.8 million and ~~$2.4~~$6.1 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, ~~respectively.~~respectively, and $20.2 million for the nine months ended September 30, 2023 and 2022. Noninterest ~~income~~expense was ~~$6.8~~$5.1 million and ~~$7.3~~$4.3 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively, and $14.8 million and $13.4 million for the nine months ended September 30, 2023 and 2022, respectively. The ~~decrease~~increase in ~~pre-tax income and~~ noninterest income for the three months ended ~~March 31,~~September 30, 2023 compared to the three months ended ~~March 31,~~September 30, 2022 was due to ~~reduced~~new customer relationships and appreciation of assets under management and supervision ~~due to market volatility~~ as a majority of investment advisory fees are billed based on the prior quarter-end assets under management and supervision balance. Additionally, pre-tax income decreased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 due to increased interest expense as a result of the rising interest rate environment. Assets under management and supervision were $4.3 billion as of ~~March 31,~~September 30, 2023, ~~$4.2~~$4.5 billion as of ~~December 31, 2022, $4.6~~June 30, 2023, $4.0 billion as of ~~March 31,~~September 30, 2022 and ~~$4.9~~$4.1 billion as of ~~December 31, 2021.~~June 30, 2022. The increase in noninterest expense for the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 was primarily driven by increases in salaries, benefits and commissions due to annual merit increases and additional staffing.

The Insurance segment reported ~~pre-tax~~noninterest income of ~~$2.7~~$4.9 million and ~~$1.7~~$4.6 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, ~~respectively. Noninterest income was $6.7~~respectively, and $16.8 million and ~~$5.8~~$15.2 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022, respectively. The increase in ~~pre-tax income and~~ noninterest income for the three and nine months ended ~~March 31,~~September 30, 2023 was primarily due to ~~increases in premiums~~increased revenue from commercial lines. In addition, the increase for ~~group life and health and commercial lines and~~the nine months ended September 30, 2023 included an increase in contingent ~~income.~~commission income of $592 thousand, which was $1.9 million and $1.3 million for the nine months ended September 30, 2023 and 2022, respectively. Contingent income is largely recognized in the first quarter of the year.

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.

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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, 2023.

Table 5—Regulatory Capital

The Corporation's and Bank's actual and required capital ratios as of ~~March 31,~~September 30, 2023 and December 31, 2022 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, 2023
At September 30, 2023														At September 30, 2023
Total Capital (to Risk-Weighted Assets):	Total Capital (to Risk-Weighted Assets):													Total Capital (to Risk-Weighted Assets):
Corporation	Corporation	$	911,112	13.78	%	$	529,004	8.00	%	$	661,255	10.00	%	Corporation	$	940,654	13.58	%	$	554,045	8.00	%	$	692,556	10.00	%
Bank	Bank	765,396		11.60		527,806		8.00		659,757		10.00		Bank	795,341		11.51		552,738		8.00		690,923		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	689,617		10.43		396,753		6.00		529,004		8.00		Corporation	715,035		10.32		415,533		6.00		554,045		8.00
Bank	Bank	692,286		10.49		395,854		6.00		527,806		8.00		Bank	718,358		10.40		414,554		6.00		552,738		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	689,617		10.43		297,565		4.50		429,816		6.50		Corporation	715,035		10.32		311,650		4.50		450,161		6.50
Bank	Bank	692,286		10.49		296,891		4.50		428,842		6.50		Bank	718,358		10.40		310,915		4.50		449,100		6.50
Tier 1 Capital (to Average Assets):	Tier 1 Capital (to Average Assets):													Tier 1 Capital (to Average Assets):
Corporation	Corporation	689,617		9.71		284,151		4.00		355,188		5.00		Corporation	715,035		9.43		303,270		4.00		379,087		5.00
Bank	Bank	692,286		9.77		283,551		4.00		354,439		5.00		Bank	718,358		9.50		302,525		4.00		378,157		5.00
At December 31, 2022	At December 31, 2022													At December 31, 2022
Total Capital (to Risk-Weighted Assets):	Total Capital (to Risk-Weighted Assets):													Total Capital (to Risk-Weighted Assets):
Corporation	Corporation	$	894,343	13.67	%	$	523,498	8.00	%	$	654,372	10.00	%	Corporation	$	894,343	13.67	%	$	523,498	8.00	%	$	654,372	10.00	%
Bank	Bank	740,936		11.35		522,370		8.00		652,962		10.00		Bank	740,936		11.35		522,370		8.00		652,962		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	678,403		10.37		392,623		6.00		523,498		8.00		Corporation	678,403		10.37		392,623		6.00		523,498		8.00
Bank	Bank	673,256		10.31		391,777		6.00		522,370		8.00		Bank	673,256		10.31		391,777		6.00		522,370		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	678,403		10.37		294,467		4.50		425,342		6.50		Corporation	678,403		10.37		294,467		4.50		425,342		6.50
Bank	Bank	673,256		10.31		293,833		4.50		424,426		6.50		Bank	673,256		10.31		293,833		4.50		424,426		6.50
Tier 1 Capital (to Average Assets):	Tier 1 Capital (to Average Assets):													Tier 1 Capital (to Average Assets):
Corporation	Corporation	678,403		9.81		276,586		4.00		345,732		5.00		Corporation	678,403		9.81		276,586		4.00		345,732		5.00
Bank	Bank	673,256		9.76		276,014		4.00		345,017		5.00		Bank	673,256		9.76		276,014		4.00		345,017		5.00

At ~~March 31,~~September 30, 2023 and December 31, 2022, the Corporation and the Bank continued to meet all capital adequacy requirements to which they are subject. At ~~March 31,~~September 30, 2023, the Bank was 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 was 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

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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 the then-recent strains on the U.S. economy as a result of the coronavirus (COVID-19). The 2020 CECL IFR allows corporations that adopt CECL before December 31, 2020 to defer 100 percent of the day-one transitional amounts

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

The Corporation adopted the transition guidance and the 2020 CECL IFR relief and applied these effects to regulatory capital.

Asset/Liability Management

The primary functions of Asset/Liability Management are to ensure 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 risk 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~~simulations use 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 tend to decrease in value; conversely, as interest rates decline, fixed-rate assets 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, certificates of deposit at maturity, operating expenses 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.

The Corporation and its subsidiaries maintain ample ability to meet the liquidity needs of its customers. Our most liquid asset, cash and cash equivalents, ~~was $138.3~~were $290.3 million at ~~March 31,~~September 30, 2023. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled ~~$367.7~~$334.5 million at ~~March 31,~~September 30, 2023. Further, the Corporation and its subsidiaries had committed borrowing capacity from the Federal Home Loan Bank and Federal Reserve Bank of ~~$3.1~~$3.3 billion at ~~March 31,~~September 30, 2023, of which ~~$1.9~~$1.7 billion was available. The Corporation and its subsidiaries also maintained unused uncommitted funding sources from correspondent banks of ~~$410.0~~$369.0 million at ~~March 31, 2023, of which $320.0 million was unused as of March 31,~~September 30, 2023. Future availability under these uncommitted funding sources is subject to the prerogatives of the granting banks and may be withdrawn at will.

Sources of Funds

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

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

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Cash Requirements

The Corporation has cash requirements for various financial obligations, including contractual obligations and commitments that require cash payments. The most significant contractual obligations, in both the under and over one-year time period, are 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~~funding sources at rates that are competitive in our market. The Bank will also use borrowings and brokered deposits to meet its obligations.

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

Recent Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

No material changes in the Corporation’s market risk occurred during the period ended ~~March 31,~~September 30, 2023. A detailed discussion of market risk is provided in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2022.

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, 2023.

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, 2023 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

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

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Item 1A. Risk Factors

~~Other than as noted below, there~~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, ~~2022.~~2022 and Item 1A of the Corporation's Quarterly Report of Form 10-Q for the quarter ended March 31, 2023.

~~Our stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.~~Further, if we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, which have come under greater scrutiny in light of recent bank failures, it may have a material adverse effect on our financial condition and results of operations.

On March 9, 2023, Silvergate Bank, La Jolla, California, announced its decision to voluntarily liquidate its assets and wind down operations. On March 10, 2023, Silicon Valley Bank, Santa Clara, California, was closed by the California Department of Financial Protection and Innovation and on March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services. In each case, the FDIC was named receiver. Additionally, on May 1, 2023, First Republic Bank, San Francisco, California, was closed by the FDIC and sold to JPMorgan Chase & Co. These banks also had elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits. These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.

These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management. If we are unable to adequately manage our liquidity, deposits, capital levels and interest rate risk, it may have a material adverse effect on our financial condition and results of operations.

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, 2023	—	$	—	—	1,229,174
~~February~~August 1 – ~~28,~~31, 2023	—	—		—	1,229,174
~~March~~September 1 – ~~31,~~30, 2023	—	—		—	1,229,174
Total	—	$	—	—

1.On May 27, 2015, the Corporation's Board of Directors approved the repurchase of 1,000,000 shares, or approximately 5% of the Corporation's common stock outstanding as of May 27, 2015. On October 26, 2022, the Corporation's Board of Directors approved the repurchase of 1,000,000 additional shares, or approximately 3.4% of the Corporation's common stock outstanding as of September 30, 2022. The stock repurchase plans do not include normal treasury activity such as purchases to fund the dividend reinvestment, employee stock purchase and equity compensation plans. The plans have no scheduled expiration date and the Board of Directors has the right to suspend or discontinue the plans 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, 2023 were as follows:


Period	Total Number of Shares Purchased	Average Price Paid per Share
~~January~~July 1 – 31, 2023	—	$	—
~~February~~August 1 – ~~28,~~31, 2023	—	—
~~March~~September 1 – ~~31,~~30, 2023	—	—
Total	—	$	—

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

~~None.~~Securities Trading Plans of Directors and Executive Officers

During the three months ended September 30, 2023, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Corporation's securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement."

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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 April 27, 2022.

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

	Exhibit 32.1	Certification of Jeffrey M. Schweitzer, President and Chief Executive Officer of the Corporation, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002.

	Exhibit 32.2	Certification of Brian J. Richardson, Senior 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, 2023, 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, 2023, 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 2,~~November 1, 2023			/s/ Jeffrey M. Schweitzer
			Jeffrey M. Schweitzer President and Chief Executive Officer (Principal Executive Officer)

Date: ~~May 2,~~November 1, 2023			/s/ Brian J. Richardson
			Brian J. Richardson Senior Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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