Univest Financial Corporation

10/29/2024 | Press release | Distributed by Public on 10/29/2024 14:25

Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

uvsp-20240930
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 September 30, 2024
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number: 0-7617
UNIVEST FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1886144
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
14 North Main Street, Souderton, Pennsylvania18964
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 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. YesNo
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). YesNo
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 29,042,929
(Title of Class) (Number of shares outstanding at October 28, 2024)
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 30, 2024 and December 31, 2023
2
Condensed Consolidated Statements of Income for theThree and NineMonths Ended September 30, 2024 and 2023
3
Condensed Consolidated Statements of Comprehensive Income for theThree and Nine Months Ended September 30, 2024 and 2023
4
Condensed Consolidated Statements of Changes in Shareholders' Equity for theThree and Nine Months Ended September 30, 2024 and 2023
6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023
8
Notes to Condensed Consolidated Financial Statements
10
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
47
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
62
Item 4.
Controls and Procedures
62
Part II.
Other Information
Item 1.
Legal Proceedings
63
Item 1A.
Risk Factors
63
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
63
Item 3.
Defaults Upon Senior Securities
63
Item 4.
Mine Safety Disclosures
63
Item 5.
Other Information
64
Item 6.
Exhibits
65
Signatures
66
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share data) At September 30, 2024 At December 31, 2023
ASSETS
Cash and due from banks $ 78,346 $ 72,815
Interest-earning deposits with other banks 426,354 176,984
Cash and cash equivalents 504,700 249,799
Investment securities held-to-maturity (fair value $123,103 and $128,277 at September 30, 2024 and December 31, 2023, respectively)
137,681 145,777
Investment securities available-for-sale (amortized cost $389,342 and $395,727, net of allowance for credit losses of $642 and $731 at September 30, 2024 and December 31, 2023, respectively)
354,100 351,553
Investments in equity securities 2,406 3,293
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost 40,235 40,499
Loans held for sale 17,131 11,637
Loans and leases held for investment 6,730,734 6,567,214
Less: Allowance for credit losses, loans and leases (86,041) (85,387)
Net loans and leases held for investment 6,644,693 6,481,827
Premises and equipment, net 47,411 51,441
Operating lease right-of-use assets 29,260 31,795
Goodwill 175,510 175,510
Other intangibles, net of accumulated amortization 7,158 10,950
Bank owned life insurance 138,744 131,344
Accrued interest receivable and other assets 106,708 95,203
Total assets $ 8,205,737 $ 7,780,628
LIABILITIES
Noninterest-bearing deposits $ 1,323,953 $ 1,468,320
Interest-bearing deposits 5,530,195 4,907,461
Total deposits 6,854,148 6,375,781
Short-term borrowings 8,256 6,306
Long-term debt 225,000 310,000
Subordinated notes 149,136 148,761
Operating lease liabilities 32,246 34,851
Accrued interest payable and other liabilities 59,880 65,721
Total liabilities 7,328,666 6,941,420
SHAREHOLDERS' EQUITY
Common stock, $5 par value: 48,000,000 shares authorized at September 30, 2024 and December 31, 2023; 31,556,799 shares issued at September 30, 2024 and December 31, 2023; 29,081,108 and 29,511,721 shares outstanding at September 30, 2024 and December 31, 2023, respectively
157,784 157,784
Additional paid-in capital 301,262 301,066
Retained earnings 512,938 474,691
Accumulated other comprehensive loss, net of tax benefit (41,623) (50,646)
Treasury stock, at cost; 2,475,691 and 2,045,078 shares at September 30, 2024 and December 31, 2023, respectively
(53,290) (43,687)
Total shareholders' equity 877,071 839,208
Total liabilities and shareholders' equity $ 8,205,737 $ 7,780,628
Note: See accompanying notes to the unaudited condensed consolidated financial statements.
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UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in thousands, except per share data) 2024 2023 2024 2023
Interest income
Interest and fees on loans and leases $ 98,359 $ 90,974 $ 285,252 $ 254,949
Interest and dividends on investment securities:
Taxable 3,706 3,540 11,094 10,547
Exempt from federal income taxes 7 15 26 44
Interest on deposits with other banks 3,624 1,865 6,341 2,856
Interest and dividends on other earning assets 742 712 2,166 2,102
Total interest income 106,438 97,106 304,879 270,498
Interest expense
Interest on deposits 48,170 37,082 133,648 82,885
Interest on short-term borrowings 1 1,117 248 7,094
Interest on long-term debt and subordinated notes 5,063 5,317 15,285 13,282
Total interest expense 53,234 43,516 149,181 103,261
Net interest income 53,204 53,590 155,698 167,237
Provision for credit losses 1,414 2,024 3,553 8,839
Net interest income after provision for credit losses 51,790 51,566 152,145 158,398
Noninterest income
Trust fee income 2,110 1,910 6,226 5,789
Service charges on deposit accounts 2,037 1,816 5,890 5,088
Investment advisory commission and fee income 5,319 4,843 15,751 14,303
Insurance commission and fee income 5,238 4,852 17,606 16,447
Other service fee income 1,815 3,020 11,274 9,414
Bank owned life insurance income 921 806 2,849 2,362
Net gain on sales of investment securities 18 - 18 -
Net gain on mortgage banking activities 1,296 1,216 3,945 2,880
Other income 1,396 228 3,166 1,921
Total noninterest income 20,150 18,691 66,725 58,204
Noninterest expense
Salaries, benefits and commissions 30,702 29,978 92,227 90,867
Net occupancy 2,723 2,594 8,274 7,935
Equipment 1,107 1,087 3,306 3,066
Data processing 4,154 4,189 12,810 12,355
Professional fees 1,579 1,763 4,733 5,373
Marketing and advertising 490 555 1,621 1,548
Deposit insurance premiums 1,097 1,258 3,330 3,475
Intangible expenses 164 220 539 726
Restructuring charges - - - 1,330
Other expense 6,536 7,344 20,494 21,641
Total noninterest expense 48,552 48,988 147,334 148,316
Income before income taxes 23,388 21,269 71,536 68,286
Income tax expense 4,810 4,253 14,546 13,436
Net income $ 18,578 $ 17,016 $ 56,990 $ 54,850
Net income per share:
Basic $ 0.64 $ 0.58 $ 1.95 $ 1.86
Diluted 0.63 0.58 1.94 1.86
Note: See accompanying notes to the unaudited condensed consolidated financial statements.
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UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended September 30,
(Dollars in thousands) 2024 2023
Before
Tax
Amount
Tax
Expense
(Benefit)
Net of
Tax
Amount
Before
Tax
Amount
Tax
Expense
(Benefit)
Net of
Tax
Amount
Income $ 23,388 $ 4,810 $ 18,578 $ 21,269 $ 4,253 $ 17,016
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized holding gains (losses) arising during the period 11,791 2,476 9,315 (12,622) (2,651) (9,971)
Reversal of provision for credit losses (139) (29) (110) - - -
Less: reclassification adjustment for net gains on sales realized in net income (18) (4) (14) - - -
Total net unrealized gains (losses) on available-for-sale investment securities 11,634 2,443 9,191 (12,622) (2,651) (9,971)
Net unrealized gains (losses) on interest rate swaps used in cash flow hedges:
Net unrealized holding gains (losses) arising during the period 3,098 650 2,448 (2,541) (534) (2,007)
Less: reclassification adjustment for net losses realized in net income 575 121 454 1,558 327 1,231
Reclassification adjustment recorded in earnings (1) 370 78 292 - - -
Total net unrealized gains (losses) on interest rate swaps used in cash flow hedges 4,043 849 3,194 (983) (207) (776)
Defined benefit pension plans:
Amortization of net actuarial gains included in net periodic pension costs (2) 147 31 116 247 52 195
Total defined benefit pension plans 147 31 116 247 52 195
Other comprehensive income (loss) 15,824 3,323 12,501 (13,358) (2,806) (10,552)
Total comprehensive income $ 39,212 $ 8,133 $ 31,079 $ 7,911 $ 1,447 $ 6,464
(1) Represents reclassification to earnings as a reduction to interest income of amounts included in accumulated other comprehensive income on the condensed consolidated balance sheet related to the interest rate swap terminated on August 2, 2024.
(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.
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Nine Months Ended September 30,
(Dollars in thousands) 2024 2023
Before
Tax
Amount
Tax
Expense
(Benefit)
Net of
Tax
Amount
Before
Tax
Amount
Tax
Expense
(Benefit)
Net of
Tax
Amount
Income $ 71,536 $ 14,546 $ 56,990 $ 68,286 $ 13,436 $ 54,850
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale investment securities:
Net unrealized holding gains (losses) arising during the period 8,950 1,880 7,070 (10,411) (2,186) (8,225)
(Reversal of provision) provision for credit losses (89) (19) (70) 397 83 314
Less: reclassification adjustment for net gains on sales realized in net income (18) (4) (14) - - -
Total net unrealized gains (losses) on available-for-sale investment securities 8,843 1,857 6,986 (10,014) (2,103) (7,911)
Net unrealized gains (losses) on interest rate swaps used in cash flow hedges:
Net unrealized holding losses arising during the period (1,979) (416) (1,563) (6,716) (1,411) (5,305)
Less: reclassification adjustment for net losses realized in net income 3,747 787 2,960 3,989 838 3,151
Reclassification adjustment recorded in earnings (1) 370 78 292 - - -
Total net unrealized gains (losses) on interest rate swaps used in cash flow hedges 2,138 449 1,689 (2,727) (573) (2,154)
Defined benefit pension plans:
Amortization of net actuarial gains included in net periodic pension costs (2) 441 93 348 739 156 583
Total defined benefit pension plans 441 93 348 739 156 583
Other comprehensive income (loss) 11,422 2,399 9,023 (12,002) (2,520) (9,482)
Total comprehensive income $ 82,958 $ 16,945 $ 66,013 $ 56,284 $ 10,916 $ 45,368
(1) Represents reclassification to earnings as a reduction to interest income of amounts included in accumulated other comprehensive income on the condensed consolidated balance sheet related to the interest rate swap terminated on August 2, 2024.
(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.
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UNIVEST FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Dollars in thousands, except per share data) Common
Shares
Outstanding
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Three Months Ended September 30, 2024
Balance at June 30, 2024 29,190,640 $ 157,784 $ 300,166 $ 500,482 $ (54,124) $ (50,171) $ 854,137
Net income - - - 18,578 - - 18,578
Other comprehensive income, net of income tax - - - - 12,501 - 12,501
Cash dividends declared ($0.21 per share)
- - - (6,122) - - (6,122)
Stock-based compensation - - 1,078 - - - 1,078
Stock issued under dividend reinvestment and employee stock purchase plans 21,906 - 57 - - 530 587
Vesting of restricted stock units, net of shares withheld to cover taxes 238 - (7) - - 5 (2)
Exercise of stock options 25,052 - (32) - - 536 504
Purchases of treasury stock (156,728) - - - - (4,190) (4,190)
Balance at September 30, 2024 29,081,108 $ 157,784 $ 301,262 $ 512,938 $ (41,623) $ (53,290) $ 877,071
(Dollars in thousands, except per share data) Common
Shares
Outstanding
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Three Months Ended September 30, 2023
Balance at June 30, 2023 29,471,124 $ 157,784 $ 299,212 $ 453,806 $ (61,034) $ (44,546) $ 805,222
Net income - - - 17,016 - - 17,016
Other comprehensive loss, net of income tax benefit - - - - (10,552) - (10,552)
Cash dividends declared ($0.21 per share)
- - - (6,190) - - (6,190)
Stock-based compensation - - 1,031 2 - - 1,033
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 238 - (7) - - 6 (1)
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) Common
Shares
Outstanding
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Treasury
Stock
Total
Nine Months Ended September 30, 2024
Balance at December 31, 2023 29,511,721 $ 157,784 $ 301,066 $ 474,691 $ (50,646) $ (43,687) $ 839,208
Net income - - - 56,990 - - 56,990
Other comprehensive income, net of income tax - - - - 9,023 - 9,023
Cash dividends declared ($0.63 per share)
- - - (18,454) - - (18,454)
Stock-based compensation - - 3,426 (289) - - 3,137
Stock issued under dividend reinvestment and employee stock purchase plans 81,133 - 69 - - 1,786 1,855
Vesting of restricted stock units, net of shares withheld to cover taxes 107,615 - (3,219) - - 2,360 (859)
Exercise of stock options 44,840 - (80) - - 957 877
Purchases of treasury stock (664,201) - - - - (14,706) (14,706)
Balance at September 30, 2024 29,081,108 $ 157,784 $ 301,262 $ 512,938 $ (41,623) $ (53,290) $ 877,071
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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) Income
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
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)
Nine Months Ended September 30,
(Dollars in thousands) 2024 2023
Cash flows from operating activities:
Net income $ 56,990 $ 54,850
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses 3,553 8,839
Depreciation of premises and equipment 4,096 3,752
Net amortization of investment securities premiums and discounts 794 873
Amortization, fair market value adjustments and capitalization of servicing rights 3,290 (350)
Net gain on sales of investment securities (18) -
Net gain on mortgage banking activities (3,945) (2,880)
Bank owned life insurance income (2,849) (2,362)
Stock-based compensation 3,414 3,229
Intangible expenses 539 726
Other adjustments to reconcile net income to cash used in operating activities (1,881) (1,105)
Originations of loans held for sale (235,166) (165,076)
Proceeds from the sale of loans held for sale 234,788 162,728
Contributions to pension and other postretirement benefit plans (187) (186)
Increase in accrued interest receivable and other assets (14,980) (8,200)
(Decrease) increase in accrued interest payable and other liabilities (1,376) 7,029
Net cash provided by operating activities 47,062 61,867
Cash flows from investing activities:
Proceeds from sale of premises and equipment 2,450 1,032
Purchases of premises and equipment (2,467) (5,220)
Proceeds from maturities, calls and principal repayments of securities held-to-maturity 10,462 11,225
Proceeds from maturities, calls and principal repayments of securities available-for-sale 43,146 24,052
Proceeds from sales of securities available-for-sale 505 -
Purchases of investment securities held-to-maturity (2,640) (6,253)
Purchases of investment securities available-for-sale (37,794) (19,348)
Proceeds from sales of equity securities 3,437 252
Purchases of money market mutual funds (2,482) (1,845)
Net decrease (increase) in other investments 264 (8,576)
Proceeds from sale of loans originally held-for-investment - 19,631
Net increase in loans and leases (165,648) (481,200)
Proceeds from sales of foreclosed / repossessed assets 68 260
Purchases of bank owned life insurance (5,710) (7,862)
Proceeds from bank owned life insurance 1,159 -
Net cash used in investing activities (155,250) (473,852)
Cash flows from financing activities:
Net increase in deposits 478,350 525,619
Net increase (decrease) in short-term borrowings 1,950 (182,465)
Proceeds from issuance of long-term debt - 250,000
Repayment of long-term debt (85,000) (25,000)
Payment of contingent consideration on acquisitions (635) (635)
Payment for shares withheld to cover taxes on vesting of restricted stock units (859) (1,232)
Purchases of treasury stock (14,706) -
Stock issued under dividend reinvestment and employee stock purchase plans 1,855 1,979
Proceeds from exercise of stock options 877 114
Cash dividends paid (18,743) (18,853)
Net cash provided by financing activities 363,089 549,527
Net decrease in cash and cash equivalents 254,901 137,542
Cash and cash equivalents at beginning of year 249,799 152,799
Cash and cash equivalents at end of period $ 504,700 $ 290,341
Supplemental disclosures of cash flow information:
Cash paid for interest $ 140,759 $ 93,435
Cash paid for income taxes, net of refunds 15,740 13,232
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Nine Months Ended September 30,
(Dollars in thousands) 2024 2023
Non cash transactions:
Transfer of loans to other real estate owned $ 407 $ 79
Transfer of leases to repossessed assets 167 -
Transfer of loans to loans held for sale - 25,646
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 and nine-month periods ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ended December 31, 2024 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, 2023, which was filed with the SEC on February 26, 2024.
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.
Earnings per Share
Basic earnings per share represent income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution, using the treasury stock method, that could occur if outstanding options on common shares had been exercised and restricted stock units had vested and the hypothetical repurchases of shares to fund such restricted stock units is less than the average restricted stock units outstanding for the periods presented. Potential common shares that may be issued by the Corporation relate to outstanding stock options and restricted stock units, and are determined using the treasury stock method. The effects of options to issue common stock and unvested restricted stock units are excluded from the computation of diluted earnings per share in periods in which the effect would be antidilutive. Antidilutive options are those options with weighted average exercise prices in excess of the weighted average market value. Antidilutive restricted stock units are those with hypothetical repurchases of shares, under the treasury stock method, exceeding the average restricted stock units outstanding for the periods presented.
Accounting Pronouncements Adopted in 2024
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)". 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 became effective on January 1, 2024 for the Corporation. The adoption of this ASU did not have a material impact on the Corporation's financial statements.
Recent Accounting Pronouncements Yet to Be Adopted
In October 2023, the FASB issued ASU No. 2023-06, "Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative". This ASU amends the disclosure or presentation requirements
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related to various subtopics in the FASB Accounting Standards Codification. The amendments in this ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC's existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC's regulations. For entities subject to the SEC's existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity.
In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures". This ASU improves reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2024. The Corporation is currently evaluating this update to determine the impact on the Corporation's disclosures.
In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". This ASU addresses investor requests for more transparency about income tax information through improvements to income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. This ASU also includes certain other amendments to improve the effectiveness of income tax disclosures. This ASU is effective for reporting periods beginning after December 15, 2024 for public business entities. For all other business entities, the amendments will be effective one year later. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.
Note 2. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share.
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars and shares in thousands, except per share data) 2024 2023 2024 2023
Numerator for basic and diluted earnings per share-net income available to common shareholders
$ 18,578 $ 17,016 $ 56,990 $ 54,850
Denominator for basic earnings per share-weighted-average shares outstanding
29,133 29,479 29,264 29,411
Effect of dilutive securities-stock options and restricted stock units 213 79 153 95
Denominator for diluted earnings per share-adjusted weighted-average shares outstanding
29,346 29,558 29,417 29,506
Basic earnings per share $ 0.64 $ 0.58 $ 1.95 $ 1.86
Diluted earnings per share $ 0.63 $ 0.58 $ 1.94 $ 1.86
Average antidilutive options and restricted stock units excluded from computation of diluted earnings per share 195 540 228 432
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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 September 30, 2024 and December 31, 2023, by contractual maturity within each type:
At September 30, 2024
(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 $ 1,283 $ - $ (26) $ - $ 1,257
After 5 years to 10 years 10,762 - (262) - 10,500
Over 10 years 125,636 12 (14,302) - 111,346
137,681 12 (14,590) - 123,103
Total $ 137,681 $ 12 $ (14,590) $ - $ 123,103
Securities Available-for-Sale
State and political subdivisions:
Within 1 year $ 1,299 $ - $ (12) $ - $ 1,287
1,299 - (12) - 1,287
Residential mortgage-backed securities:
After 1 year to 5 years 373 - (8) - 365
After 5 years to 10 years 11,870 - (608) - 11,262
Over 10 years 297,067 757 (28,652) - 269,172
309,310 757 (29,268) - 280,799
Collateralized mortgage obligations:
After 5 years to 10 years 175 - (5) - 170
Over 10 years 1,735 - (117) - 1,618
1,910 - (122) - 1,788
Corporate bonds:
Within 1 year 6,400 8 (71) (6) 6,331
After 1 year to 5 years 10,423 49 (305) (23) 10,144
After 5 years to 10 years 60,000 - (5,636) (613) 53,751
76,823 57 (6,012) (642) 70,226
Total $ 389,342 $ 814 $ (35,414) $ (642) $ 354,100
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At December 31, 2023
(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 $ 1,871 $ - $ (62) $ - $ 1,809
After 5 years to 10 years 12,047 - (462) - 11,585
Over 10 years 131,859 - (16,976) - 114,883
145,777 - (17,500) - 128,277
Total $ 145,777 $ - $ (17,500) $ - $ 128,277
Securities Available-for-Sale
State and political subdivisions:
Within 1 year $ 1,030 $ - $ (1) $ - $ 1,029
After 1 year to 5 years 1,298 - (26) - 1,272
2,328 - (27) - 2,301
Residential mortgage-backed securities:
After 1 year to 5 years 567 - (20) - 547
After 5 years to 10 years 13,653 - (964) - 12,689
Over 10 years 285,628 131 (34,443) - 251,316
299,848 131 (35,427) - 264,552
Collateralized mortgage obligations:
After 5 years to 10 years 241 - (11) - 230
Over 10 years 1,960 - (189) - 1,771
2,201 - (200) - 2,001
Corporate bonds:
Within 1 year 18,011 1 (176) (27) 17,809
After 1 year to 5 years 13,339 23 (671) (43) 12,648
After 5 years to 10 years 60,000 - (7,097) (661) 52,242
91,350 24 (7,944) (731) 82,699
Total $ 395,727 $ 155 $ (43,598) $ (731) $ 351,553
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 $447.8 million and $464.0 million at September 30, 2024 and December 31, 2023, respectively, were pledged to secure public funds deposits and contingency funding. There were no pledged securities to secure credit derivatives and interest rate swaps at September 30, 2024 or December 31, 2023. 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 nine months ended September 30, 2024 or 2023.
Nine Months Ended September 30,
(Dollars in thousands) 2024 2023
Securities available-for-sale:
Proceeds from sales $ 505 $ -
Gross realized gains on sales 18 -
Tax expense related to net realized gains on sales 4 -
At September 30, 2024 and December 31, 2023, 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 September 30, 2024 and December 31, 2023, by the length of time those securities were in a continuous loss position.
Less than
Twelve Months
Twelve Months
or Longer
Total
(Dollars in thousands) Fair Value Unrealized
Losses
Fair Value Unrealized
Losses
Fair Value Unrealized
Losses
At September 30, 2024
Securities Held-to-Maturity
Residential mortgage-backed securities $ - $ - $ 120,463 $ (14,590) $ 120,463 $ (14,590)
Total $ - $ - $ 120,463 $ (14,590) $ 120,463 $ (14,590)
Securities Available-for-Sale
Residential mortgage-backed securities $ - $ - $ 220,491 $ (29,268) $ 220,491 $ (29,268)
Collateralized mortgage obligations - - 1,788 (122) 1,788 (122)
Total $ - $ - $ 222,279 $ (29,390) $ 222,279 $ (29,390)
At December 31, 2023
Securities Held-to-Maturity
Residential mortgage-backed securities $ 6,005 $ (94) $ 122,272 $ (17,406) $ 128,277 $ (17,500)
Total $ 6,005 $ (94) $ 122,272 $ (17,406) $ 128,277 $ (17,500)
Securities Available-for-Sale
State and political subdivisions $ 1,029 $ (1) $ - $ - $ 1,029 $ (1)
Residential mortgage-backed securities 16,992 (65) 238,053 (35,362) 255,045 (35,427)
Collateralized mortgage obligations - - 2,001 (200) 2,001 (200)
Corporate bonds 780 (1) - - 780 (1)
Total $ 18,801 $ (67) $ 240,054 $ (35,562) $ 258,855 $ (35,629)
At September 30, 2024, 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 $120.5 million, including unrealized losses of $14.6 million. These holdings were comprised of 88 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 nine months ended September 30, 2024.
At September 30, 2024, 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 $222.3 million, including unrealized losses of $29.4 million. These holdings were comprised of: (1) 98 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, and (3) one investment grade corporate 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 negative fair value of these securities was not indicative of a credit loss. Accrued interest receivable on available-for-sale debt securities totaled $1.1 million at September 30, 2024 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 nine months ended September 30, 2024 and September 30, 2023 of the allowance for credit losses on securities available-for-sale.
(Dollars in thousands) Corporate Bonds
Nine months ended September 30, 2024
Securities Available-for-Sale
Beginning balance $ (731)
Change in securities for which a previous expected credit loss was recognized 89
Ending balance $ (642)
Nine months ended 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 (395)
Ending balance $ (1,537)
At September 30, 2024, the fair value of available-for-sale securities in an unrealized loss position for which an allowance for credit losses has been recorded was $68.0 million, including unrealized losses of $6.7 million, and allowance for credit losses of $642 thousand. These holdings were comprised of 33 investment grade corporate bonds and one municipal bond, all of 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 intend 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 following is a summary of unrealized and realized gains and losses on equity securities recognized in other noninterest income in the condensed consolidated statements of income during the nine months ended September 30, 2024 or 2023.
Nine Months Ended September 30,
(Dollars in thousands) 2024 2023
Equity Securities:
Net gains (losses) recognized during the period 68 (118)
Less: Net losses recognized during the period on equity securities sold during the period (68) -
Unrealized (losses) recognized during the reporting period on equity securities still held at the reporting date - (118)
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Note 4. Loans and Leases
Summary of Major Loan and Lease Categories
(Dollars in thousands) At September 30, 2024 At December 31, 2023
Commercial, financial and agricultural $ 1,044,043 $ 989,723
Real estate-commercial 3,442,083 3,302,798
Real estate-construction 285,616 394,462
Real estate-residential secured for business purpose 530,674 517,002
Real estate-residential secured for personal purpose 969,562 909,015
Real estate-home equity secured for personal purpose 182,901 179,282
Loans to individuals 26,794 27,749
Lease financings 249,061 247,183
Total loans and leases held for investment, net of deferred income $ 6,730,734 $ 6,567,214
Less: Allowance for credit losses, loans and leases (86,041) (85,387)
Net loans and leases held for investment $ 6,644,693 $ 6,481,827
Imputed interest on lease financings, included in the above table $ (32,337) $ (30,485)
Net deferred costs, included in the above table 7,810 7,949
Overdraft deposits included in the above table 148 280
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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 September 30, 2024 and December 31, 2023:
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 September 30, 2024
Commercial, financial and agricultural $ 1,008 $ 888 $ - $ 1,896 $ 1,039,444 $ 1,041,340 $ 2,703 $ 1,044,043
Real estate-commercial real estate and construction:
Commercial real estate 3,539 975 - 4,514 3,433,889 3,438,403 3,680 3,442,083
Construction 1,831 - - 1,831 280,986 282,817 2,799 285,616
Real estate-residential and home equity:
Residential secured for business purpose 1,720 169 - 1,889 528,155 530,044 630 530,674
Residential secured for personal purpose 3,292 644 - 3,936 961,641 965,577 3,985 969,562
Home equity secured for personal purpose 429 829 - 1,258 180,640 181,898 1,003 182,901
Loans to individuals 70 77 28 175 26,604 26,779 15 26,794
Lease financings 840 1,665 282 2,787 245,770 248,557 504 249,061
Total $ 12,729 $ 5,247 $ 310 $ 18,286 $ 6,697,129 $ 6,715,415 $ 15,319 $ 6,730,734
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, 2023
Commercial, financial and agricultural $ 1,355 $ 348 $ 285 $ 1,988 $ 985,469 $ 987,457 $ 2,266 $ 989,723
Real estate-commercial real estate and construction:
Commercial real estate 1,763 1,072 - 2,835 3,294,254 3,297,089 5,709 3,302,798
Construction 10,022 45 - 10,067 378,328 388,395 6,067 394,462
Real estate-residential and home equity:
Residential secured for business purpose 930 643 - 1,573 514,339 515,912 1,090 517,002
Residential secured for personal purpose 6,464 76 - 6,540 898,262 904,802 4,213 909,015
Home equity secured for personal purpose 721 144 - 865 177,301 178,166 1,116 179,282
Loans to individuals 191 84 37 312 27,437 27,749 - 27,749
Lease financings 987 374 212 1,573 245,552 247,125 58 247,183
Total $ 22,433 $ 2,786 $ 534 $ 25,753 $ 6,520,942 $ 6,546,695 $ 20,519 $ 6,567,214
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Nonperforming Loans and Leases
The following presents, by class of loans and leases, nonperforming loans and leases at September 30, 2024 and December 31, 2023.
At September 30, 2024 At December 31, 2023
(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 $ - $ - $ - $ 8 $ - $ 8
Loans and leases held for investment:
Commercial, financial and agricultural $ 2,703 $ - $ 2,703 $ 2,266 $ 285 $ 2,551
Real estate-commercial real estate and construction:
Commercial real estate 3,680 - 3,680 5,709 - 5,709
Construction 2,799 - 2,799 6,067 - 6,067
Real estate-residential and home equity:
Residential secured for business purpose 630 - 630 1,090 - 1,090
Residential secured for personal purpose 3,985 - 3,985 4,213 - 4,213
Home equity secured for personal purpose 1,003 - 1,003 1,116 - 1,116
Loans to individuals 15 28 43 - 37 37
Lease financings 504 282 786 58 212 270
Total $ 15,319 $ 310 $ 15,629 $ 20,527 $ 534 $ 21,061
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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 September 30, 2024 and December 31, 2023.
(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 September 30, 2024
Commercial, financial and agricultural $ 297 $ 2,406 $ 2,703 $ -
Real estate-commercial 2,835 845 3,680 -
Real estate-construction 2,799 - 2,799 -
Real estate-residential secured for business purpose 630 - 630 -
Real estate-residential secured for personal purpose 3,985 - 3,985 -
Real estate-home equity secured for personal purpose 1,003 - 1,003 -
Loans to individuals 15 - 15 28
Lease financings - 504 504 282
Total $ 11,564 $ 3,755 $ 15,319 $ 310
At December 31, 2023
Commercial, financial and agricultural $ 332 $ 1,934 $ 2,266 $ 285
Real estate-commercial 5,687 22 5,709 -
Real estate-construction 2,931 3,136 6,067 -
Real estate-residential secured for business purpose 1,090 - 1,090 -
Real estate-residential secured for personal purpose 4,213 - 4,213 -
Real estate-home equity secured for personal purpose 1,116 - 1,116 -
Loans to individuals - - - 37
Lease financings - 58 58 212
Total $ 15,369 $ 5,150 $ 20,519 $ 534
For the nine months ended September 30, 2024, $101 thousand of interest income was recognized on nonaccrual loans and leases.
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 September 30, 2024 and December 31, 2023.
(Dollars in thousands) Real Estate
Other (1)
None (2)
Total
At September 30, 2024
Commercial, financial and agricultural $ 1,591 $ 617 $ 495 $ 2,703
Real estate-commercial 3,654 8 18 3,680
Real estate-construction 2,799 - - 2,799
Real estate-residential secured for business purpose 630 - - 630
Real estate-residential secured for personal purpose 3,985 - - 3,985
Real estate-home equity secured for personal purpose 1,003 - - 1,003
Loans to individuals - - 15 15
Lease financings - 504 - 504
Total $ 13,662 $ 1,129 $ 528 $ 15,319
(Dollars in thousands) Real Estate
Other (1)
None Total
At December 31, 2023
Commercial, financial and agricultural $ 2,236 $ 30 $ - $ 2,266
Real estate-commercial 5,709 - - 5,709
Real estate-construction 6,067 - - 6,067
Real estate-residential secured for business purpose 1,090 - - 1,090
Real estate-residential secured for personal purpose 4,213 - - 4,213
Real estate-home equity secured for personal purpose 1,116 - - 1,116
Lease financings - 58 - 58
Total $ 20,431 $ 88 $ - $ 20,519
(1) Collateral consists of business assets, including accounts receivable, personal property and equipment.
(2) Loans fully guaranteed or fully reserved given lack of collateral.
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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. Commercial, financial and agricultural loans, real estate-commercial loans, real estate-construction loans and real estate-residential secured for a business purpose 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, 2023. 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 September 30, 2024 and December 31, 2023.
Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
At September 30, 2024
Commercial, Financial and Agricultural
Risk Rating
1. Pass $ 135,459 $ 93,186 $ 90,971 $ 118,956 $ 18,160 $ 46,760 $ 473,047 $ 415 $ 976,954
2. Special Mention 3,748 695 12,097 115 459 - 15,864 - 32,978
3. Substandard - - 1,922 7,135 - 6,495 18,559 - 34,111
Total $ 139,207 $ 93,881 $ 104,990 $ 126,206 $ 18,619 $ 53,255 $ 507,470 $ 415 $ 1,044,043
Current period gross charge-offs $ 64 $ - $ - $ 70 $ - $ - $ 1,887 $ - $ 2,021
Real Estate-Commercial
Risk Rating
1. Pass $ 345,128 $ 449,928 $ 876,697 $ 591,966 $ 557,715 $ 524,602 $ 68,857 $ - $ 3,414,893
2. Special Mention - - - - 1,684 9,208 - - 10,892
3. Substandard - 3,360 4,565 4,049 8 1,371 2,945 - 16,298
Total $ 345,128 $ 453,288 $ 881,262 $ 596,015 $ 559,407 $ 535,181 $ 71,802 $ - $ 3,442,083
Current period gross charge-offs $ - $ - $ - $ - $ - $ 35 $ - $ - $ 35
Real Estate-Construction
Risk Rating
1. Pass $ 50,947 $ 110,331 $ 82,815 $ 4,154 $ 1,706 $ 1,929 $ 22,557 $ - $ 274,439
2. Special Mention - 1,079 - - - - - - 1,079
3. Substandard 251 - 3,838 2,649 2,403 - 957 - 10,098
Total $ 51,198 $ 111,410 $ 86,653 $ 6,803 $ 4,109 $ 1,929 $ 23,514 $ - $ 285,616
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ 500 $ - $ 500
Real Estate-Residential Secured for Business Purpose
Risk Rating
1. Pass $ 72,383 $ 95,082 $ 141,285 $ 107,521 $ 51,058 $ 31,183 $ 31,532 $ - $ 530,044
2. Special Mention - - - - - - - - -
3. Substandard - - - - 586 44 - - 630
Total $ 72,383 $ 95,082 $ 141,285 $ 107,521 $ 51,644 $ 31,227 $ 31,532 $ - $ 530,674
Totals By Risk Rating
1. Pass $ 603,917 $ 748,527 $ 1,191,768 $ 822,597 $ 628,639 $ 604,474 $ 595,993 $ 415 $ 5,196,330
2. Special Mention 3,748 1,774 12,097 115 2,143 9,208 15,864 - 44,949
3. Substandard 251 3,360 10,325 13,833 2,997 7,910 22,461 - 61,137
Total $ 607,916 $ 753,661 $ 1,214,190 $ 836,545 $ 633,779 $ 621,592 $ 634,318 $ 415 $ 5,302,416
Total current period gross charge-offs $ 64 $ - $ - $ 70 $ - $ 35 $ 2,387 $ - $ 2,556
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Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total
At December 31, 2023
Commercial, Financial and Agricultural
Risk Rating
1. Pass $ 130,755 $ 121,402 $ 135,550 $ 26,745 $ 19,029 $ 40,973 $ 455,076 $ 653 $ 930,183
2. Special Mention - 13,454 - - 6,029 - 15,251 - 34,734
3. Substandard - 2,195 8,206 - 216 - 14,189 - 24,806
Total $ 130,755 $ 137,051 $ 143,756 $ 26,745 $ 25,274 $ 40,973 $ 484,516 $ 653 $ 989,723
Real Estate-Commercial
Risk Rating
1. Pass $ 480,527 $ 841,529 $ 642,133 $ 604,700 $ 329,443 $ 296,802 $ 74,947 $ - $ 3,270,081
2. Special Mention 1,238 227 3,132 5,821 - 10,416 - - 20,834
3. Substandard 1,324 2,732 2,768 - 226 1,911 2,922 - 11,883
Total $ 483,089 $ 844,488 $ 648,033 $ 610,521 $ 329,669 $ 309,129 $ 77,869 $ - $ 3,302,798
Real Estate-Construction
Risk Rating
1. Pass $ 112,127 $ 218,637 $ 4,139 $ 2,600 $ 241 $ 2,211 $ 14,440 $ - $ 354,395
2. Special Mention - 7,655 - - 4,045 5,265 10,908 - 27,873
3. Substandard 2,400 1,574 2,932 - - - 5,288 - 12,194
Total $ 114,527 $ 227,866 $ 7,071 $ 2,600 $ 4,286 $ 7,476 $ 30,636 $ - $ 394,462
Real Estate-Residential Secured for Business Purpose
Risk Rating
1. Pass $ 104,904 $ 151,680 $ 120,035 $ 60,360 $ 38,006 $ 11,631 $ 29,295 $ - $ 515,911
2. Special Mention - - - - - - - - -
3. Substandard - 162 - 620 - 309 - - 1,091
Total $ 104,904 $ 151,842 $ 120,035 $ 60,980 $ 38,006 $ 11,940 $ 29,295 $ - $ 517,002
Totals By Risk Rating
1. Pass $ 828,313 $ 1,333,248 $ 901,857 $ 694,405 $ 386,719 $ 351,617 $ 573,758 $ 653 $ 5,070,570
2. Special Mention 1,238 21,336 3,132 5,821 10,074 15,681 26,159 - 83,441
3. Substandard 3,724 6,663 13,906 620 442 2,220 22,399 - 49,974
Total $ 833,275 $ 1,361,247 $ 918,895 $ 700,846 $ 397,235 $ 369,518 $ 622,316 $ 653 $ 5,203,985
The Corporation had no loans with a risk rating of Doubtful included within recorded investment in loans and leases held for investment at September 30, 2024 or December 31, 2023.
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, 2023. 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.
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 September 30, 2024 and December 31, 2023.
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Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Total
At September 30, 2024
Real Estate-Residential Secured for Personal Purpose
Payment Performance
1. Performing $ 15,359 $ 181,305 $ 356,799 $ 198,409 $ 123,725 $ 89,980 $ - $ 965,577
2. Nonperforming - - 144 38 2,839 964 - 3,985
Total $ 15,359 $ 181,305 $ 356,943 $ 198,447 $ 126,564 $ 90,944 $ - $ 969,562
Real Estate-Home Equity Secured for Personal Purpose
Payment Performance
1. Performing $ 267 $ 364 $ 2,359 $ 417 $ 346 $ 1,390 $ 176,755 $ 181,898
2. Nonperforming - - - - - - 1,003 1,003
Total $ 267 $ 364 $ 2,359 $ 417 $ 346 $ 1,390 $ 177,758 $ 182,901
Loans to Individuals
Payment Performance
1. Performing $ 1,952 $ 1,084 $ 560 $ 345 $ 40 $ 638 $ 22,132 $ 26,751
2. Nonperforming - - 14 - - 29 - 43
Total $ 1,952 $ 1,084 $ 574 $ 345 $ 40 $ 667 $ 22,132 $ 26,794
Current period gross charge-offs $ 153 $ 102 $ 31 $ 3 $ - $ 88 $ 353 $ 730
Lease Financings
Payment Performance
1. Performing $ 68,208 $ 89,367 $ 52,820 $ 27,077 $ 8,621 $ 2,182 $ - $ 248,275
2. Nonperforming 145 246 16 358 - 21 - 786
Total $ 68,353 $ 89,613 $ 52,836 $ 27,435 $ 8,621 $ 2,203 $ - $ 249,061
Current period gross charge-offs $ - $ 92 $ 119 $ 203 $ 14 $ 7 $ - $ 435
Totals by Payment Performance
1. Performing $ 85,786 $ 272,120 $ 412,538 $ 226,248 $ 132,732 $ 94,190 $ 198,887 $ 1,422,501
2. Nonperforming 145 246 174 396 2,839 1,014 1,003 5,817
Total $ 85,931 $ 272,366 $ 412,712 $ 226,644 $ 135,571 $ 95,204 $ 199,890 $ 1,428,318
Total current period gross charge-offs $ 153 $ 194 $ 150 $ 206 $ 14 $ 95 $ 353 $ 1,165
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Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands) 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Total
At December 31, 2023
Real Estate-Residential Secured for Personal Purpose
Payment Performance
1. Performing $ 139,765 $ 328,383 $ 206,285 $ 128,157 $ 22,798 $ 79,296 $ 118 $ 904,802
2. Nonperforming - 153 43 2,749 - 1,268 - 4,213
Total $ 139,765 $ 328,536 $ 206,328 $ 130,906 $ 22,798 $ 80,564 $ 118 $ 909,015
Real Estate-Home Equity Secured for Personal Purpose
Payment Performance
1. Performing $ 511 $ 2,567 $ 510 $ 409 $ 165 $ 1,463 $ 172,541 $ 178,166
2. Nonperforming - - - - - - 1,116 1,116
Total $ 511 $ 2,567 $ 510 $ 409 $ 165 $ 1,463 $ 173,657 $ 179,282
Loans to Individuals
Payment Performance
1. Performing $ 1,831 $ 894 $ 530 $ 107 $ 48 $ 1,004 $ 23,298 $ 27,712
2. Nonperforming - - - - - 37 - 37
Total $ 1,831 $ 894 $ 530 $ 107 $ 48 $ 1,041 $ 23,298 $ 27,749
Lease Financings
Payment Performance
1. Performing $ 110,832 $ 70,070 $ 41,392 $ 17,874 $ 5,681 $ 1,064 $ - $ 246,913
2. Nonperforming 11 104 88 19 36 12 - 270
Total $ 110,843 $ 70,174 $ 41,480 $ 17,893 $ 5,717 $ 1,076 $ - $ 247,183
Totals by Payment Performance
1. Performing $ 252,939 $ 401,914 $ 248,717 $ 146,547 $ 28,692 $ 82,827 $ 195,957 $ 1,357,593
2. Nonperforming 11 257 131 2,768 36 1,317 1,116 5,636
Total $ 252,950 $ 402,171 $ 248,848 $ 149,315 $ 28,728 $ 84,144 $ 197,073 $ 1,363,229
The Corporation had no revolving loans which were converted to term loans included within recorded investment in loans and leases held for investment at September 30, 2024 or December 31, 2023.
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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 September 30, 2024 and 2023. There were no changes to the reasonable and supportable forecast period, the reversion period, or any significant methodology changes during the nine months ended September 30, 2024.
(Dollars in thousands) Beginning balance Provision (reversal of provision) for credit losses Charge-offs Recoveries Ending balance
Three Months Ended September 30, 2024
Allowance for credit losses, loans and leases:
Commercial, financial and agricultural $ 14,545 $ 544 $ (508) $ 108 $ 14,689
Real estate-commercial 45,978 688 (35) 3 46,634
Real estate-construction 6,153 (611) - - 5,542
Real estate-residential secured for business purpose 7,739 (89) - - 7,650
Real estate-residential secured for personal purpose 6,606 287 - - 6,893
Real estate-home equity secured for personal purpose 1,688 7 - - 1,695
Loans to individuals 348 304 (324) 12 340
Lease financings 2,688 (14) (83) 7 2,598
Total $ 85,745 $ 1,116 $ (950) $ 130 $ 86,041
Three Months Ended September 30, 2023
Allowance for credit losses, loans and leases:
Commercial, financial and agricultural $ 13,871 $ 979 $ (744) $ 30 $ 14,136
Real estate-commercial 44,757 519 - 3 45,279
Real estate-construction 5,433 298 - 1 5,732
Real estate-residential secured for business purpose 8,696 (44) - 4 8,656
Real estate-residential secured for personal purpose 5,588 254 - - 5,842
Real estate-home equity secured for personal purpose 1,296 (38) - 33 1,291
Loans to individuals 560 (61) (124) 12 387
Lease financings 2,508 190 (189) 5 2,514
Total $ 82,709 $ 2,097 $ (1,057) $ 88 $ 83,837
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(Dollars in thousands) Beginning balance Provision (reversal of provision) for credit losses Charge-offs Recoveries Ending balance
Nine Months Ended September 30, 2024
Allowance for credit losses, loans and leases:
Commercial, financial and agricultural $ 13,699 $ 2,807 $ (2,021) $ 204 $ 14,689
Real estate-commercial 45,849 810 (35) 10 46,634
Real estate-construction 6,543 (501) (500) - 5,542
Real estate-residential secured for business purpose 8,692 (1,277) - 235 7,650
Real estate-residential secured for personal purpose 6,349 410 - 134 6,893
Real estate-home equity secured for personal purpose 1,289 406 - - 1,695
Loans to individuals 392 609 (730) 69 340
Lease financings 2,574 425 (435) 34 2,598
Total $ 85,387 $ 3,689 $ (3,721) $ 686 $ 86,041
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
Total $ 79,004 $ 9,156 $ (4,887) $ 564 $ 83,837
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The following presents, by portfolio segment, the balance in the 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 September 30, 2024 and 2023:
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 Total ending balance
At September 30, 2024
Commercial, financial and agricultural $ 1,010 $ 13,679 $ 14,689 $ 2,703 $ 1,041,340 $ 1,044,043
Real estate-commercial 23 46,611 46,634 3,680 3,438,403 3,442,083
Real estate-construction - 5,542 5,542 2,799 282,817 285,616
Real estate-residential secured for business purpose - 7,650 7,650 630 530,044 530,674
Real estate-residential secured for personal purpose - 6,893 6,893 3,985 965,577 969,562
Real estate-home equity secured for personal purpose - 1,695 1,695 1,003 181,898 182,901
Loans to individuals - 340 340 15 26,779 26,794
Lease financings - 2,598 2,598 - 249,061 249,061
Total $ 1,033 $ 85,008 $ 86,041 $ 14,815 $ 6,715,919 $ 6,730,734
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
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 nine months ended September 30, 2024 and 2023. There were no modified loans to borrowers experiencing financial difficulty during the three months ended September 30, 2024.
Term Extension
Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023
(Dollars in thousands) Number
of
Loans
Amortized Cost Basis* % of Total Class of Financing Receivable Related
Reserve
Number
of
Loans
Amortized Cost Basis* % of Total Class of Financing Receivable Related
Reserve
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial, financial and agricultural 1 $ 4,925 0.47 % $ 23 - $ - - % $ -
Real estate-commercial 2 3,212 0.09 1 1 1,948 0.06 -
Total 3 $ 8,137 $ 24 1 $ 1,948 $ -
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate-commercial - - - - 1 $ 1,741 0.05 % $ -
Real estate-construction 2 2,799 0.98 - - - - -
Total 2 $ 2,799 $ - 1 $ 1,741 $ -
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Other-Than-Insignificant Payment Delay
Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023
(Dollars in thousands) Number
of
Loans
Amortized Cost Basis* % of Total Class of Financing Receivable Related
Reserve
Number
of
Loans
Amortized Cost Basis* % of Total Class of Financing Receivable Related
Reserve
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial, financial and agricultural 2 $ 7,167 0.69 % $ 32 - $ - - % $ -
Total 2 $ 7,167 $ 32 - $ - $ -
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Total - $ - $ - - $ - $ -
*Amortized cost excludes $91 thousand and $15 thousand of accrued interest receivable on modified loans for the ninemonths ended September 30, 2024 and September 30, 2023, respectively.
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 nine months ended September 30, 2024 and 2023. There were no modified loans to borrowers experiencing financial difficulty during the three months ended September 30, 2024.
Term Extension Other-Than-Insignificant Payment Delay
(Dollars in thousands) No. of
Loans
Financial Effect No. of
Loans
Financial Effect
Nine Months Ended September 30, 2024
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial, financial and agricultural 1
Added 10 months to the life of the loan, which reduced monthly payment amount for the borrower.
2
Provided 3-month payment deferrals to assist borrowers.
Real estate-commercial 2
Added a weighted-average 8 months to the life of the loans, which reduced monthly payment amounts for the borrowers.
-
Total 3 2
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate-construction 2
Added a weighted-average 8 months to the life of the loans, which reduced monthly payment amounts for the borrowers.
-
Total 2 -
Nine Months Ended September 30, 2023
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate-commercial 1
Added 5 months to the life of the loan, which reduced monthly payment amount for the borrower.
-
Total 1 -
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate-commercial 1
Added 16 months to the life of the loan, which reduced monthly payment amount for the borrower.
-
Total 1 -
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The following presents, by class of loans, the amortized cost of accruing and nonaccrual modified loans to borrowers experiencing financial difficulty that had a payment default subsequent to modification during the three and nine months ended September 30, 2024 and 2023 and were modified in the 12 months prior to that default.
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
Term Extension Term Extension
(Dollars in thousands) Number
of Loans
Amortized Cost Basis Number
of Loans
Amortized Cost Basis Number
of Loans
Amortized Cost Basis Number
of Loans
Amortized Cost Basis
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate-commercial 1 $ 1,900 - - 1 $ 1,900 - -
Total 1 $ 1,900 - $ - 1 $ 1,900 - $ -
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Total - $ - - $ - - $ - - $ -
The following presents, by class of loans, the amortized cost and performance status of accruing and nonaccrual modified loans to borrowers experiencing financial difficulty that have been modified in the last 12 months.
At September 30, 2024
(Dollars in thousands) Current 30-89 Days Past Due 90 Days or More Past Due Total
Accruing Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial, financial and agricultural $ 12,092 $ - $ - $ 12,092
Real estate-commercial 6,158 1,900 - 8,058
Total $ 18,250 $ 1,900 $ - $ 20,150
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Real estate-construction $ 2,799 $ - $ - $ 2,799
Total $ 2,799 $ - $ - $ 2,799
As of September 30, 2024, the Bank had $971 thousand in 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 September 30, 2024 or December 31, 2023.
(Dollars in thousands) At September 30, 2024 At December 31, 2023
Real estate-residential secured for personal purpose $ 3,176 $ 5,147
Real estate-home equity secured for personal purpose 45 -
Total $ 3,221 $ 5,147
The following presents foreclosed residential real estate property included in other real estate owned at September 30, 2024 or December 31, 2023.
(Dollars in thousands) At September 30, 2024 At December 31, 2023
Foreclosed residential real estate $ 234 $ 79
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Lease Financings
The following presents the schedule of minimum lease payments receivable:
(Dollars in thousands) At September 30, 2024 At December 31, 2023
2024 (excluding the nine months ended September 30, 2024) $ 25,254 $ 87,101
2025 88,976 74,002
2026 72,203 56,525
2027 51,904 36,944
2028 28,418 14,945
Thereafter 9,918 3,506
Total future minimum lease payments receivable 276,673 273,023
Plus: Unguaranteed residual 1,505 1,242
Plus: Initial direct costs 3,220 3,403
Less: Imputed interest (32,337) (30,485)
Lease financings $ 249,061 $ 247,183
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 nine months ended September 30, 2024 were as follows:
(Dollars in thousands) Banking Wealth Management Insurance Consolidated
Balance at December 31, 2023 $ 138,476 $ 15,434 $ 21,600 $ 175,510
Addition to goodwill from acquisitions - - - -
Balance at September 30, 2024 $ 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 September 30, 2024 At December 31, 2023
(Dollars in thousands) Gross Carrying Amount
Accumulated Amortization(1)
Net Carrying Amount Gross Carrying Amount
Accumulated Amortization(1)
Net Carrying Amount
Amortized intangible assets:
Core deposit intangibles $ 6,788 $ 6,541 $ 247 $ 6,788 $ 6,329 $ 459
Customer related intangibles 2,476 1,257 1,219 4,162 2,653 1,509
Servicing rights 11,617 5,925 5,692 30,850 21,868 8,982
Total amortized intangible assets $ 20,881 $ 13,723 $ 7,158 $ 41,800 $ 30,850 $ 10,950
(1) Included within accumulated amortization is a valuation allowance of $798 thousand and $98 thousand on servicing rights at September 30, 2024 and December 31, 2023, respectively.
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The estimated aggregate amortization expense for core deposit and customer-related intangibles for the remainder of 2024 and the succeeding fiscal years is as follows:
Year (Dollars in thousands) Amount
Remainder of 2024 $ 147
2025 469
2026 318
2027 216
2028 161
Thereafter 155
Total $ 1,466
The aggregate fair value of servicing rights was $9.7 million and $17.7 million at September 30, 2024 and December 31, 2023, respectively. The fair value of these rights was determined using a discount rate of 10.9% and 12.3% at September 30, 2024 and December 31, 2023, respectively. The change in the fair value of servicing rights from December 31, 2023 was primarily related to the sale of servicing rights associated with $591.1 million of serviced loans in the first quarter of 2024.
Changes in the servicing rights balance are summarized as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2024 2023 2024 2023
Beginning of period $ 6,083 $ 8,568 $ 8,982 $ 8,572
Servicing rights capitalized 541 707 1,504 1,456
Amortization of servicing rights (151) (350) (628) (1,100)
Sold servicing rights - - (3,466) -
Changes in valuation allowance (781) (4) (700) (7)
End of period $ 5,692 $ 8,921 $ 5,692 $ 8,921
Loans serviced for others $ 996,701 $ 1,568,817 $ 996,701 $ 1,568,817
The change in loans serviced for others from the three and nine months ended September 30, 2023 was primarily related to the sale of mortgage servicing rights associated with $591.1 million of serviced loans in the first quarter of 2024.
Activity in the valuation allowance for servicing rights was as follows:
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2024 2023 2024 2023
Valuation allowance, beginning of period $ (17) $ (8) $ (98) $ (5)
Additions (781) (4) (700) (7)
Valuation allowance, end of period $ (798) $ (12) $ (798) $ (12)
The estimated amortization expense of servicing rights for the remainder of 2024 and the succeeding fiscal years is as follows:
Year (Dollars in thousands) Amount
Remainder of 2024 $ 1,324
2025 1,014
2026 792
2027 628
2028 506
Thereafter 1,428
Total $ 5,692
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Note 6. Deposits
Deposits and their respective weighted average interest rate at September 30, 2024 and December 31, 2023 consisted of the following:
At September 30, 2024 At December 31, 2023
Weighted Average Interest Rate Amount Weighted Average Interest Rate Amount
(Dollars in thousands)
Noninterest-bearing deposits - % $ 1,323,953 - % $ 1,468,320
Demand deposits 3.81 3,292,600 3.34 2,973,784
Savings deposits 0.49 719,853 0.48 779,885
Time deposits 4.50 1,517,742 4.22 1,153,792
Total 2.88 % $ 6,854,148 2.38 % $ 6,375,781
Deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC, which is currently $250 thousand per account owner. The aggregate amount of time deposits in denominations over $250 thousand was $315.9 million at September 30, 2024 and $187.0 million at December 31, 2023.
At September 30, 2024, the scheduled maturities of time deposits were as follows:
Year (Dollars in thousands) Amount
Remainder of 2024 $ 255,529
2025 859,008
2026 85,242
2027 131,153
2028 147,171
Thereafter 39,639
Total $ 1,517,742
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 September 30, 2024 At December 31, 2023
(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:
Customer repurchase agreements $ 8,256 0.05 % $ 6,306 0.05 %
Long-term debt:
FHLB advances $ 225,000 4.35 % $ 310,000 3.73 %
Subordinated notes 149,136 6.08 148,761 6.08
The Corporation, through the Bank, has a credit facility with the Federal Home Loan Bank (the FHLB) that had a maximum borrowing capacity of approximately $3.1 billion and $3.2 billion at September 30, 2024 and December 31, 2023, respectively. All borrowings and letters of credit from the FHLB are secured by qualifying commercial real estate and residential mortgage loans, investments and other assets. The Bank had outstanding short-term letters of credit with the FHLB totaling $1.5 billion and $1.1 billion at September 30, 2024 and December 31, 2023, 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 $1.4 billion and $1.7 billion at September 30, 2024 and December 31, 2023, respectively.
The Corporation, through the Bank, holds investment securities at the Federal Reserve Bank of Philadelphia (the FRB) to provide access to the Discount Window Lending program. During the second quarter of 2024, the Bank was approved to
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participate in the FRB Borrower in Custody program, which provides additional committed borrowing capacity for the Bank through the Discount Lending Window program based upon select loans pledged to the FRB. The total borrowing capacity based upon the qualifying pledged commercial loans and held investment securities was $446.8 million and $183.3 million at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024 and December 31, 2023, 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 September 30, 2024 and December 31, 2023, the Corporation had no outstanding borrowings under this line.
The Corporation and the Bank had $3.6 billion and $3.4 billion of committed borrowing capacity at September 30, 2024 and December 31, 2023, respectively, of which $1.8 billion and $1.9 billion was available as of September 30, 2024 and December 31, 2023, respectively. The Corporation, through the Bank, also maintained uncommitted funding sources from correspondent banks of $468.0 million at September 30, 2024 and $369.0 million at December 31, 2023. 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) As of September 30, 2024 Weighted Average Rate
Remainder of 2024 $ - - %
2025 75,000 4.46
2026 100,000 4.29
2027 25,000 3.99
2028 25,000 4.61
Thereafter - -
Total $ 225,000 4.35 %
Note 8. Retirement Plans and Other Postretirement Benefits
Information with respect to the Retirement Plans and Other Postretirement Benefits follows:
Three Months Ended September 30,
2024 2023 2024 2023
(Dollars in thousands) Retirement Plans Other Post Retirement
Benefits
Service cost $ 141 $ 133 $ 14 $ 19
Interest cost 596 590 27 32
Expected loss on plan assets (870) (762) - -
Amortization of net actuarial loss (gain) 175 250 (28) (3)
Net periodic benefit cost $ 42 $ 211 $ 13 $ 48
Nine Months Ended September 30,
2024 2023 2024 2023
(Dollars in thousands) Retirement Plans Other Post Retirement
Benefits
Service cost $ 424 $ 399 $ 42 $ 57
Interest cost 1,788 1,774 81 96
Expected loss on plan assets (2,610) (2,293) - -
Amortization of net actuarial loss (gain) 526 750 (85) (11)
Net periodic benefit cost $ 128 $ 630 $ 38 $ 142
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.
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The Corporation expects to make total contributions of $156 thousand to the Retirement Plans and $112 thousand to Other Postretirement Benefit Plans in 2024. During the nine months ended September 30, 2024, the Corporation contributed $117 thousand to its Retirement Benefit Plans and $70 thousand to its Other Postretirement Benefit Plans. During the nine months ended September 30, 2024, $2.1 million was paid to participants from the Retirement Plans and $70 thousand was paid to participants from the Other Postretirement Benefit Plans.
Note 9. Stock-Based Incentive Plan
On April 26, 2023, the 2023 Equity Incentive Plan (the Plan) was approved by shareholders. This Plan replaced the Amended and Restated Univest 2013 Long-Term Incentive Plan, which expired in April 2023.
The following is a summary of the Corporation's stock option activity and related information for the nine months ended September 30, 2024:
(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, 2024
Outstanding at December 31, 2023 269,914 $ 26.14
Forfeited (11,322) 28.31
Exercised (44,840) 19.48
Outstanding at September 30, 2024 213,752 $ 27.42 2.7 $ 192
Exercisable at September 30, 2024 213,752 $ 27.42 2.7 $ 192
The Corporation did not grant any stock options during the nine months ended September 30, 2024 or September 30, 2023.
The following is a summary of nonvested restricted stock units at September 30, 2024 including changes during the nine months then ended:
(Dollars in thousands, except per share data) Nonvested Stock Units Weighted Average Grant Date Fair Value
Nonvested stock units at December 31, 2023 392,548 $ 26.54
Granted 277,134 19.81
Added by performance factor 10,125 28.42
Vested (151,375) 27.66
Forfeited (17,925) 24.52
Nonvested stock units at September 30, 2024 510,507 $ 22.66
Certain information regarding restricted stock units is summarized below for the periods indicated:
Nine Months Ended September 30,
(Dollars in thousands, except per share data) 2024 2023
Restricted stock units granted 277,134 213,429
Weighted average grant date fair value $ 19.81 $ 25.04
Intrinsic value of units granted $ 5,490 $ 5,345
Restricted stock units vested 151,375 181,508
Weighted average grant date fair value $ 27.66 $ 22.21
Intrinsic value of units vested $ 2,990 $ 4,512
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 September 30, 2024 is presented below:
(Dollars in thousands) Unrecognized Compensation Cost Weighted-Average Period Remaining (Years)
Restricted stock units $ 7,116 1.9
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The following table presents information related to the Corporation's compensation expense related to stock incentive plans recognized for the periods indicated:
Nine Months Ended September 30,
(Dollars in thousands) 2024 2023
Stock-based compensation expense:
Restricted stock units $ 3,414 $ 3,229
Employee stock purchase plan 73 83
Total $ 3,487 $ 3,312
Tax benefit on nonqualified stock option expense and disqualifying dispositions of incentive stock options $ 879 $ 492
Note 10. Accumulated Other Comprehensive (Loss) Income
The following table shows the components of accumulated other comprehensive (loss) income, net of taxes, for the periods presented:
(Dollars in thousands) Net Unrealized
Losses 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, 2023 $ (34,321) $ (4,566) $ (11,759) $ (50,646)
Other comprehensive income 6,986 1,397 348 8,731
Reclassification adjustment recorded in earnings (1) - 292 - 292
Balance, September 30, 2024 $ (27,335) $ (2,877) $ (11,411) $ (41,623)
Balance, December 31, 2022 $ (40,066) $ (6,831) $ (15,207) $ (62,104)
Other comprehensive (loss) income (7,911) (2,154) 583 (9,482)
Balance, September 30, 2023 $ (47,977) $ (8,985) $ (14,624) $ (71,586)
(1) Represents reclassification to earnings as a reduction to interest income of amounts included in accumulated other comprehensive income on the condensed consolidated balance sheet related to the interest rate swap terminated on August 2, 2024.
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 paid a variable rate equal to the Prime Rate and received a fixed rate of 5.99% with a maturity date of May 4, 2026. On August 2, 2024, the Corporation terminated the swap pursuant to the termination clause. The Corporation incurred an unwind fee of $4.0 million, of which $370 thousand was reclassified to earnings as a reduction to interest income in the quarter. Additionally, unamortized origination and third party fees totaled $235 thousand at September 30, 2024. The $3.9 million will be amortized into interest income over the remaining 19 months of the original swap.
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.
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At September 30, 2024, the Corporation had exposure to 134 variable-rate to fixed-rate interest rate swap transactions between the third-party financial institution and customers with a current notional amount of $846.6 million and remaining maturities ranging from 2 months to 10 years. At September 30, 2024, the fair value of the Corporation's interest rate swap credit derivatives was a liability of $123 thousand. At September 30, 2024, the fair value of the swaps to the customers was a net gain of $37.8 million. At September 30, 2024, the Corporation's credit exposure related to customers totaled $4.9 million.
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 agreements do not provide for a limitation of the maximum potential payment amount.
Mortgage Banking Derivatives
Derivative loan commitments represent agreements for delayed delivery of financial instruments in which the buyer agrees to purchase, and the seller agrees to deliver, at a specified future date, a specified instrument at a specified price or yield. The Corporation's derivative loan commitments are commitments to sell loans secured by 1- to 4-family residential properties whose predominant risk characteristic is interest rate risk.
Derivatives Tables
The following table presents the notional amounts and fair values of derivatives designated as hedging instruments recorded on the condensed consolidated balance sheets at September 30, 2024 and December 31, 2023. The Corporation pledges cash or securities to cover the negative fair value of derivative instruments. Cash collateral associated with derivative instruments are not added to or netted against the fair value amounts.
Derivative Assets Derivative Liabilities
(Dollars in thousands) Notional
Amount
Balance Sheet
Classification
Fair
Value
Balance Sheet
Classification
Fair
Value
At September 30, 2024
Total $ - $ - $ -
At December 31, 2023
Interest rate swap - cash flow hedge $ 250,000 $ - Other liabilities $ 5,779
Total $ 250,000 $ - $ 5,779
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 September 30, 2024 and December 31, 2023:
Derivative Assets Derivative Liabilities
(Dollars in thousands) Notional
Amount
Balance Sheet
Classification
Fair
Value
Balance Sheet
Classification
Fair
Value
At September 30, 2024
Credit derivatives $ 846,634 $ - Other liabilities $ 123
Interest rate locks with customers 34,095 Other assets 578 -
Forward loan sale commitments 51,226 - Other liabilities 75
Total $ 931,955 $ 578 $ 198
At December 31, 2023
Credit derivatives $ 862,756 $ - Other liabilities $ 186
Interest rate locks with customers 21,174 Other assets 717 -
Forward loan sale commitments 32,811 - Other liabilities 427
Total $ 916,741 $ 717 $ 613
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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 Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2024 2023 2024 2023
Interest rate swap-cash flow hedge-net interest payments Interest income $ (575) $ (1,558) $ (3,747) $ (3,989)
Reclassification adjustment included in earnings (1) Interest income (370) - (370) -
Total net loss $ (945) $ (1,558) $ (4,117) $ (3,989)
(1) Represents reclassification to earnings as a reduction to interest income of amounts included in accumulated other comprehensive income on the condensed consolidated balance sheet related to the interest rate swap terminated on August 2, 2024.
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 Nine Months Ended
September 30, September 30,
(Dollars in thousands) 2024 2023 2024 2023
Credit derivatives Other noninterest income $ 22 $ 263 $ 360 $ 1,170
Interest rate locks with customers Net (loss) gain on mortgage banking activities (169) (66) (139) 16
Forward loan sale commitments Net gain (loss) on mortgage banking activities 63 (13) 352 119
Total net (loss) gain $ (84) $ 184 $ 573 $ 1,305
The following table presents amounts included in accumulated other comprehensive (loss) income for derivatives designated as hedging instruments at September 30, 2024 and December 31, 2023:
(Dollars in thousands) Accumulated Other
Comprehensive (Loss) Income
At September 30, 2024 At December 31, 2023
Interest rate swap-cash flow hedge (1) Fair value, net of taxes $ (2,877) $ (4,566)
Total $ (2,877) $ (4,566)
(1) The interest rate swap was terminated on August 2, 2024. This after-tax amount will be reclassified to earnings as a reduction to interest income over the remaining 19 months of the original swap.
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,
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discounted cash-flow methodologies, or similar techniques, as well as instruments for which the fair value calculation requires significant management judgment or estimation.
Following is a description of the valuation methodologies used for instruments measured at fair value on a recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy.
Investment Securities
Where quoted prices are available in an active market for identical instruments, investment securities are classified within Level 1 of the valuation hierarchy. Level 1 investment securities include U.S. Treasury securities, most equity securities and money market mutual funds. Mutual funds are registered investment companies which are valued at net asset value of shares on a market exchange at the end of each trading day. Level 2 of the valuation hierarchy includes securities issued by U.S. Government sponsored enterprises, mortgage-backed securities, collateralized mortgage obligations, corporate and municipal bonds and certain equity securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. In cases where there is limited activity or less transparency around inputs to the valuation, investment securities are classified within Level 3 of the valuation hierarchy.
Fair values for securities are determined using independent pricing services and market-participating brokers. The Corporation's independent pricing service utilizes evaluated pricing models that vary by asset class and incorporate available trade, bid and other market information for structured securities, cash flow and, when available, loan performance data. Because many fixed income securities do not trade on a daily basis, the pricing service's evaluated pricing applications apply information as applicable through processes, such as benchmarking of like securities, sector groupings, and matrix pricing, to prepare evaluations. If at any time, the pricing service determines that it does not have sufficient verifiable information to value a particular security, the Corporation will utilize valuations from another pricing service. Management has a sufficient understanding of the third-party service's valuation models, assumptions and inputs used in determining the fair value of securities to enable management to maintain an appropriate system of internal control.
On a quarterly basis, the Corporation reviews changes, as submitted by the pricing service, in the market value of its security portfolio. Individual changes in valuations are reviewed for consistency with general interest rate movements and any known credit concerns for specific securities. If, upon the Corporation's review or in comparing with another service, a material difference between pricing evaluations were to exist, the Corporation may submit an inquiry to the current pricing service regarding the data used to determine the valuation of a particular security. If the Corporation determines there is market information that would support a different valuation than from the current pricing service's evaluation, the Corporation may utilize and change the security's valuation. There were no material differences in valuations noted at September 30, 2024.
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.
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
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the projected revenue may result in a higher fair value of the contingent consideration liability. Alternatively, a decrease in the projected revenue may result in a lower estimated fair value of the contingent consideration liability.
The following table presents the assets and liabilities measured at fair value on a recurring basis at September 30, 2024 and December 31, 2023, classified using the fair value hierarchy:
At September 30, 2024
(Dollars in thousands) Level 1 Level 2 Level 3 Assets/
Liabilities at
Fair Value
Assets:
Available-for-sale securities:
State and political subdivisions $ - $ 1,287 $ - $ 1,287
Residential mortgage-backed securities - 280,799 - 280,799
Collateralized mortgage obligations - 1,788 - 1,788
Corporate bonds - 70,226 - 70,226
Total available-for-sale securities - 354,100 - 354,100
Equity securities:
Money market mutual funds 2,406 - - 2,406
Total equity securities 2,406 - - 2,406
Loans held for sale - 17,131 - 17,131
Interest rate locks with customers* - 578 - 578
Total assets $ 2,406 $ 371,809 $ - $ 374,215
Liabilities:
Contingent consideration liability $ - $ - $ 627 $ 627
Credit derivatives* - - 123 123
Forward loan sale commitments* - 75 - 75
Total liabilities $ - $ 75 $ 750 $ 825
* Such financial instruments are recorded at fair value as further described in Note 11, "Derivative Instruments and Hedging Activities."
The $123 thousand of credit derivatives liability represented the Credit Valuation Adjustment (CVA), which is obtained from real-time financial market data, of 134 interest rate swaps with a notional amount of $846.6 million. The September 30, 2024 CVA is calculated using a 40% loss given default rate on the most recent investment grade credit curve.
The contingent consideration liability resulting from the Sheaffer acquisition was calculated using a discount rate of 8.3% on the acquisition date. During the nine months ended September 30, 2024, the Corporation paid $635 thousand in contingent consideration related to this acquisition. The contingent consideration liability was $627 thousand at September 30, 2024. The remaining potential cash payments that could result from the contingent consideration arrangement for the Sheaffer acquisition range from $0 to a maximum of $635 thousand through the period ending November 30, 2024.
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At December 31, 2023
(Dollars in thousands) Level 1 Level 2 Level 3 Assets/
Liabilities at
Fair Value
Assets:
Available-for-sale securities:
State and political subdivisions $ - $ 2,301 $ - $ 2,301
Residential mortgage-backed securities - 264,552 - 264,552
Collateralized mortgage obligations - 2,001 - 2,001
Corporate bonds - 82,699 - 82,699
Total available-for-sale securities - 351,553 - 351,553
Equity securities:
Equity securities - financial services industry 764 - - 764
Money market mutual funds 2,529 - - 2,529
Total equity securities 3,293 - - 3,293
Loans held for sale - 11,637 - 11,637
Interest rate locks with customers* - 717 - 717
Total assets $ 3,293 $ 363,907 $ - $ 367,200
Liabilities:
Contingent consideration liability $ - $ - $ 1,224 $ 1,224
Interest rate swaps* - 5,779 - 5,779
Credit derivatives* - - 186 186
Forward loan sale commitments* - 427 - 427
Total liabilities $ - $ 6,206 $ 1,410 $ 7,616
* Such financial instruments are recorded at fair value as further described in Note 11, "Derivative Instruments and Hedging Activities."
The $186 thousand of credit derivatives liability represented the CVA, which is obtained from real-time financial market data, of 133 interest rate swaps with a notional amount of $862.8 million. The December 31, 2023 CVA is calculated using a 40% loss given default rate on the most recent investment grade credit curve.
The contingent consideration liability resulting from the Sheaffer acquisition was calculated using a discount rate of 8.3% on the acquisition date. During the year ended December 31, 2023, the Corporation paid $653 thousand in contingent consideration related to this acquisition. The contingent consideration liability was $1.2 million at December 31, 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 $1.3 million through the period ending November 30, 2024.
The following table includes a roll forward of credit derivatives for which the Corporation utilized Level 3 inputs to determine fair value on a recurring basis for the nine months ended September 30, 2024 and 2023:
Nine Months Ended September 30, 2024
(Dollars in thousands) Balance at
December 31,
2023
Additions Increase in value Balance at September 30, 2024
Credit derivatives $ (186) $ (297) $ 360 $ (123)
Net total $ (186) $ (297) $ 360 $ (123)
Nine Months Ended September 30, 2023
(Dollars in thousands) Balance at
December 31,
2022
Additions Increase in value Balance at September 30, 2023
Credit derivatives $ (360) $ (973) $ 1,166 $ (167)
Net total $ (360) $ (973) $ 1,166 $ (167)
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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 nine months ended September 30, 2024 and 2023:
Nine Months Ended September 30, 2024
(Dollars in thousands) Balance at
December 31,
2023
Payment of
Contingent
Consideration
Adjustment
of Contingent
Consideration
Balance at September 30, 2024
Paul I. Sheaffer Insurance Agency $ 1,224 $ 635 $ 38 $ 627
Total contingent consideration liability $ 1,224 $ 635 $ 38 $ 627
Nine Months Ended September 30, 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 $ 1,765 $ 635 $ 73 $ 1,203
Total contingent consideration liability $ 1,765 $ 635 $ 73 $ 1,203
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 individual assets. The following table represents assets measured at fair value on a non-recurring basis at September 30, 2024 and December 31, 2023:
At September 30, 2024
(Dollars in thousands) Level 1 Level 2 Level 3 Assets at
Fair Value
Individually analyzed loans held for investment $ - $ - $ 13,782 $ 13,782
Other real estate owned - - 20,915 20,915
Repossessed assets - - 79 79
Total $ - $ - $ 34,776 $ 34,776
At December 31, 2023
(Dollars in thousands) Level 1 Level 2 Level 3 Assets at
Fair Value
Individually analyzed loans held for investment $ - $ - $ 18,960 $ 18,960
Other real estate owned - - 19,032 19,032
Total $ - $ - $ 37,992 $ 37,992
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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 September 30, 2024 and December 31, 2023. The disclosed fair values are classified using the fair value hierarchy.
At September 30, 2024
(Dollars in thousands) Level 1 Level 2 Level 3 Fair
Value
Carrying
Amount
Assets:
Cash and short-term interest-earning assets $ 504,700 $ - $ - $ 504,700 $ 504,700
Held-to-maturity securities - 123,103 - 123,103 137,681
Federal Home Loan Bank, Federal Reserve Bank and other stock NA NA NA NA 40,235
Net loans and leases held for investment - - 6,444,735 6,444,735 6,630,911
Servicing rights - - 9,693 9,693 5,692
Total assets $ 504,700 $ 123,103 $ 6,454,428 $ 7,082,231 $ 7,319,219
Liabilities:
Deposits:
Demand and savings deposits, non-maturity $ 5,336,406 $ - $ - $ 5,336,406 $ 5,336,406
Time deposits - 1,525,692 - 1,525,692 1,517,742
Total deposits 5,336,406 1,525,692 - 6,862,098 6,854,148
Short-term borrowings 8,256 - - 8,256 8,256
Long-term debt - 227,096 - 227,096 225,000
Subordinated notes - 146,750 - 146,750 149,136
Total liabilities $ 5,344,662 $ 1,899,538 $ - $ 7,244,200 $ 7,236,540
At December 31, 2023
(Dollars in thousands) Level 1 Level 2 Level 3 Fair
Value
Carrying
Amount
Assets:
Cash and short-term interest-earning assets $ 249,799 $ - $ - $ 249,799 $ 249,799
Held-to-maturity securities - 128,277 - 128,277 145,777
Federal Home Loan Bank, Federal Reserve Bank and other stock NA NA NA NA 40,499
Net loans and leases held for investment - - 6,290,455 6,290,455 6,462,867
Servicing rights - - 17,724 17,724 8,982
Total assets $ 249,799 $ 128,277 $ 6,308,179 $ 6,686,255 $ 6,907,924
Liabilities:
Deposits:
Demand and savings deposits, non-maturity $ 5,221,989 $ - $ - $ 5,221,989 $ 5,221,989
Time deposits - 1,153,775 - 1,153,775 1,153,792
Total deposits 5,221,989 1,153,775 - 6,375,764 6,375,781
Short-term borrowings 6,306 - - 6,306 6,306
Long-term debt - 310,817 - 310,817 310,000
Subordinated notes - 140,500 - 140,500 148,761
Total liabilities $ 5,228,295 $ 1,605,092 $ - $ 6,833,387 $ 6,840,848
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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.
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 September 30, 2024, individually analyzed loans held for investment had a carrying amount of $14.8 million with a valuation allowance of $1.0 million. At December 31, 2023, individually analyzed loans held for investment had a carrying amount of $20.7 million with a valuation allowance of $1.8 million. The Corporation had no individually analyzed leases at September 30, 2024 or December 31, 2023.
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 September 30, 2024, servicing rights had a net carrying amount of $6.5 million, which included a valuation allowance of $798 thousand. At December 31, 2023, servicing rights had a net carrying amount of $9.1 million, which included a valuation allowance of $98 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 nine months ended September 30, 2024, 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 September 30, 2024 and December 31, 2023, OREO had a carrying amount of $20.9 million and $19.0 million, respectively. During the quarter, one residential real estate property was transferred to OREO with a carrying value of $156 thousand and during the second quarter, one commercial real estate property was transferred to OREO with a carrying value of $252 thousand. Additionally, during the nine months ended September 30, 2024, $1.6 million in capitalizable costs were
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recorded related to an existing property. 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.
Repossessed Assets:Repossessed assets represents non-real estate assets that the Corporation has acquired by taking possession of the asset that was used as loan or lease collateral. The Corporation reports repossessed assets at the fair value less cost to sell, adjusted periodically based on a current appraisal provided by a third party based on their assumptions and quoted market prices for similar assets, when available. Write-downs and any gain or loss upon the sale of repossessed assets is recorded in other noninterest income. Repossessed assets are reported in other assets on the condensed consolidated balance sheet. At September 30, 2024, repossessed assets had a carrying amount of $79 thousand. During the quarter, repossessed assets totaling $68 thousand were sold. The Corporation had no repossessed assets at December 31, 2023. Repossessed assets are classified within Level 3 in the fair value hierarchy based on appraisals, letters of intent, agreement of sale or indications of value 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 September 30, 2024, 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) At September 30, 2024 At December 31, 2023 At September 30, 2023
Banking $ 8,069,321 $ 7,656,154 $ 7,706,141
Wealth Management 65,355 57,715 57,845
Insurance 53,388 48,535 47,507
Other 17,673 18,224 16,573
Consolidated assets $ 8,205,737 $ 7,780,628 $ 7,828,066
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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 September 30, 2024 and 2023.
Three Months Ended
September 30, 2024
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 106,419 $ 19 $ - $ - $ 106,438
Interest expense 50,953 - - 2,281 53,234
Net interest income (expense) 55,466 19 - (2,281) 53,204
Provision for credit losses 1,414 - - - 1,414
Noninterest income 7,281 7,481 5,247 141 20,150
Noninterest expense 39,392 5,587 4,018 (445) 48,552
Intersegment (revenue) expense* (560) 437 123 - -
Income (loss) before income taxes 22,501 1,476 1,106 (1,695) 23,388
Income tax expense (benefit) 4,688 302 259 (439) 4,810
Net income (loss) $ 17,813 $ 1,174 $ 847 $ (1,256) $ 18,578
Net capital expenditures $ 544 $ - $ 6 $ 60 $ 610
Three Months Ended
September 30, 2023
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 97,079 $ 18 $ - $ 9 $ 97,106
Interest expense 41,235 - - 2,281 43,516
Net interest income (expense) 55,844 18 - (2,272) 53,590
Provision for credit losses 2,024 - - - 2,024
Noninterest income 6,950 6,803 4,912 26 18,691
Noninterest expense 39,299 5,130 3,987 572 48,988
Intersegment (revenue) expense* (236) 114 122 - -
Income (loss) before income taxes 21,707 1,577 803 (2,818) 21,269
Income tax expense (benefit) 4,452 284 185 (668) 4,253
Net income (loss) $ 17,255 $ 1,293 $ 618 $ (2,150) $ 17,016
Net capital expenditures $ 560 $ 9 $ 5 $ 33 $ 607
Nine Months Ended
September 30, 2024
(Dollars in thousands) Banking Wealth Management Insurance Other Consolidated
Interest income $ 304,805 $ 56 $ - $ 18 $ 304,879
Interest expense 142,336 - - 6,845 149,181
Net interest income (expense) 162,468 56 - (6,826) 155,698
Provision for credit losses 3,553 - - - 3,553
Noninterest income 26,706 22,134 17,721 164 66,725
Noninterest expense 116,211 16,591 12,058 2,474 147,334
Intersegment (revenue) expense* (1,680) 1,310 370 - -
Income (loss) before income taxes 71,090 4,289 5,293 (9,136) 71,536
Income tax expense (benefit) 14,553 839 1,184 (2,030) 14,546
Net income (loss) $ 56,537 $ 3,450 $ 4,109 $ (7,106) $ 56,990
Net capital expenditures $ (234) $ 11 $ 73 $ 167 $ 17
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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
*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, growth and composition of our loan and investment portfolios; and estimates of our risks and future credit provisions, 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, including 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, 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;
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 or the sale of loans or other assets and/or lead to higher operating costs and higher costs to retain or attract deposits;
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 and other 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 and the percentage of uninsured deposits in the portfolio;
Our ability to implement our business strategies;
Our ability to manage market risk, credit risk, interest rate 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 international 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, 2023 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
In order to prepare the Corporation's financial statements in conformity with U.S. generally accepted accounting principles, management 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 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 2023 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 Nine Months Ended
September 30, Change September 30, Change
(Dollars in thousands, except per share data) 2024 2023 Amount Percent 2024 2023 Amount Percent
Net income $ 18,578 $ 17,016 $ 1,562 9.2 % $ 56,990 $ 54,850 $ 2,140 3.9 %
Net income per share:
Basic $ 0.64 $ 0.58 $ 0.06 10.3 $ 1.95 $ 1.86 $ 0.09 4.8
Diluted 0.63 0.58 0.05 8.6 1.94 1.86 0.08 4.3
Return on average assets 0.92 % 0.88 % 4 BP 4.5 0.97 % 0.98 % (1 BP) (1.0)
Return on average equity 8.55 % 8.32 % 23 BP 2.8 8.95 % 9.14 % (19 BP) (2.1)
The Corporation reported net income of $18.6 million, or $0.63 diluted earnings per share, for the three months ended September 30, 2024, compared to net income of $17.0 million, or $0.58 diluted earnings per share, for the three months ended September 30, 2023. The Corporation reported net income of $57.0 million, or $1.94 diluted earnings per share, for the nine
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months ended September 30, 2024, compared to net income of $54.9 million, or $1.86 diluted earnings per share, for the nine months ended September 30, 2023. The financial results for the nine months ended September 30, 2024 included a $3.4 million net gain ($2.7 million after-tax), or $0.09 diluted earnings per share, generated from the sale of mortgage servicing rights associated with $591.1 million of serviced loans in the first quarter of 2024 and tax-free bank owned life insurance ("BOLI") death benefit claims of $171 thousand, which represented $0.01 diluted earnings per share for the quarter. Additionally, the financial results for the third quarter of 2023 included a $1.3 million ($1.1 million after-tax), or $0.04 diluted earnings per share, restructuring charge associated with expense management strategies deployed in response to macroeconomic headwinds.
Results of Operations
Net Interest Income
Net interest income is the difference between interest earned primarily on loans, 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 September 30, 2024 and 2023. 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 September 30, 2024 versus 2023
Net interest income on a tax-equivalent basis for the three months ended September 30, 2024 was $53.5 million, a decrease of $371 thousand, or 0.7%, compared to $53.9 million for the three months ended September 30, 2023. Net interest income on a tax-equivalent basis for the nine months ended September 30, 2024 was $156.6 million, a decrease of $11.6 million, or 6.9%, compared to $168.2 million for the nine months ended September 30, 2023. The decrease in tax-equivalent net interest income for the three and nine months ended September 30, 2024 compared to the comparable periods in the prior year reflects the continued pressure on the cost of deposits due to the shift of balances from lower to higher cost deposit products, which has exceeded the increase in interest income from asset yield expansion and the increase in average interest-earning assets. However, we continue to see indicators of stabilization in the cost of funds and our funding mix.
The net interest margin, on a tax-equivalent basis, was 2.82% and 2.85% for the three and nine months ended September 30, 2024, respectively, compared to 2.96% and 3.22% for the three and nine months ended September 30, 2023, respectively. Excess liquidity reduced net interest margin by approximately nine and four basis points for the three and nine months ended September 30, 2024. Excess liquidity reduced net interest margin by approximately four and one basis point for the three and nine months ended September 30, 2023.
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Table 1-Average Balances and Interest Rates-Tax-Equivalent Basis
Three Months Ended September 30,
2024 2023
(Dollars in thousands) Average
Balance
Income/
Expense
Average
Rate
Average
Balance
Income/
Expense
Average
Rate
Assets:
Interest-earning deposits with other banks $ 270,724 $ 3,624 5.33 % $ 143,109 $ 1,865 5.17 %
Obligations of states and political subdivisions* 1,283 7 2.17 2,281 16 2.78
Other debt and equity securities 492,051 3,706 3.00 504,060 3,540 2.79
Federal Home Loan Bank, Federal Reserve Bank and other stock 38,769 742 7.61 40,406 712 6.99
Total interest-earning deposits, investments and other interest-earning assets 802,827 8,079 4.00 689,856 6,133 3.53
Commercial, financial and agricultural loans 997,465 18,459 7.36 995,355 17,545 6.99
Real estate-commercial and construction loans 3,592,556 52,672 5.83 3,552,709 49,548 5.53
Real estate-residential loans 1,692,361 21,127 4.97 1,543,360 18,270 4.70
Loans to individuals 26,651 549 8.20 26,538 525 7.85
Tax-exempt loans and leases 232,159 2,565 4.40 234,685 2,430 4.11
Lease financings 189,599 3,275 6.87 184,522 2,928 6.30
Gross loans and leases 6,730,791 98,647 5.83 6,537,169 91,246 5.54
Total interest-earning assets 7,533,618 106,726 5.64 7,227,025 97,379 5.35
Cash and due from banks 62,902 62,673
Allowance for credit losses, loans and leases (86,517) (83,827)
Premises and equipment, net 47,989 52,071
Operating lease right-of-use assets 29,620 31,647
Other assets 417,653 404,394
Total assets $ 8,005,265 $ 7,693,983
Liabilities:
Interest-bearing checking deposits $ 1,215,166 $ 8,824 2.89 % $ 1,070,063 $ 6,703 2.49 %
Money market savings 1,849,628 21,213 4.56 1,645,210 17,850 4.30
Regular savings 727,395 878 0.48 828,672 861 0.41
Time deposits 1,491,560 17,255 4.60 1,140,622 11,668 4.06
Total time and interest-bearing deposits 5,283,749 48,170 3.63 4,684,567 37,082 3.14
Short-term borrowings 8,210 1 0.05 93,028 1,117 4.76
Long-term debt 247,826 2,781 4.46 320,000 3,036 3.76
Subordinated notes 149,068 2,282 6.09 148,568 2,281 6.09
Total borrowings 405,104 5,064 4.97 561,596 6,434 4.55
Total interest-bearing liabilities 5,688,853 53,234 3.72 5,246,163 43,516 3.29
Noninterest-bearing deposits 1,357,575 1,538,143
Operating lease liabilities 32,627 34,788
Accrued expenses and other liabilities 61,804 63,374
Total liabilities 7,140,859 6,882,468
Total interest-bearing liabilities and noninterest-bearing deposits ("Cost of Funds") 7,046,428 3.01 6,784,306 2.54
Shareholders' Equity:
Common stock 157,784 157,784
Additional paid-in capital 300,565 299,575
Retained earnings and other equity 406,057 354,156
Total shareholders' equity 864,406 811,515
Total liabilities and shareholders' equity $ 8,005,265 $ 7,693,983
Net interest income $ 53,492 $ 53,863
Net interest spread 1.92 2.06
Effect of net interest-free funding sources 0.90 0.90
Net interest margin 2.82 % 2.96 %
Ratio of average interest-earning assets to average interest-bearing liabilities 132.43 % 137.76 %
*Obligations of states and political subdivisions 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 $897 thousand and $563 thousand for the three months ended September 30, 2024 and 2023, 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 September 30, 2024 and 2023 have been calculated using the Corporation's federal applicable rate of 21%.
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Nine Months Ended September 30,
2024 2023
(Dollars in thousands) Average
Balance
Income/
Expense
Average
Rate
Average
Balance
Income/
Expense
Average
Rate
Assets:
Interest-earning deposits with other banks $ 159,114 $ 6,341 5.32 % $ 79,630 $ 2,856 4.80 %
Obligations of states and political subdivisions* 1,500 26 2.32 2,284 48 2.81
Other debt and equity securities 494,310 11,094 3.00 511,420 10,547 2.76
Federal Home Loan Bank, Federal Reserve Bank and other stock 38,392 2,166 7.54 39,664 2,102 7.09
Total interest-earning deposits, investments and other interest-earning assets 693,316 19,627 3.78 632,998 15,553 3.29
Commercial, financial and agricultural loans 972,003 52,429 7.21 997,590 50,002 6.70
Real estate-commercial and construction loans 3,572,375 153,890 5.75 3,447,551 137,929 5.35
Real estate-residential loans 1,657,142 61,095 4.92 1,478,871 51,216 4.63
Loans to individuals 26,928 1,639 8.13 26,859 1,453 7.23
Tax-exempt loans and leases 231,679 7,505 4.33 233,211 7,159 4.10
Lease financings 189,733 9,549 6.72 175,416 8,128 6.20
Gross loans and leases 6,649,860 286,107 5.75 6,359,498 255,887 5.38
Total interest-earning assets 7,343,176 305,734 5.56 6,992,496 271,440 5.19
Cash and due from banks 58,070 59,811
Allowance for credit losses, loans and leases (86,435) (81,829)
Premises and equipment, net 49,098 52,067
Operating lease right-of-use assets 30,359 31,384
Other assets 414,246 399,141
Total assets $ 7,808,514 $ 7,453,070
Liabilities:
Interest-bearing checking deposits $ 1,163,526 $ 24,353 2.80 % $ 980,725 $ 15,259 2.08 %
Money market savings 1,749,592 59,564 4.55 1,532,318 43,020 3.75
Regular savings 752,336 2,712 0.48 900,448 2,375 0.35
Time deposits 1,384,576 47,019 4.54 845,635 22,231 3.51
Total time and interest-bearing deposits 5,050,030 133,648 3.54 4,259,126 82,885 2.60
Short-term borrowings 15,919 248 2.08 195,606 7,094 4.85
Long-term debt 263,380 8,441 4.28 245,366 6,438 3.51
Subordinated notes 148,944 6,844 6.14 148,444 6,844 6.16
Total borrowings 428,243 15,533 4.85 589,416 20,376 4.62
Total interest-bearing liabilities 5,478,273 149,181 3.64 4,848,542 103,261 2.85
Noninterest-bearing deposits 1,383,707 1,709,533
Operating lease liabilities 33,389 34,548
Accrued expenses and other liabilities 62,586 57,906
Total liabilities 6,957,955 6,650,529
Total interest-bearing liabilities and noninterest-bearing deposits ("Cost of Funds") 6,861,980 2.90 6,558,075 2.11
Shareholders' Equity:
Common stock 157,784 157,784
Additional paid-in capital 300,224 299,550
Retained earnings and other equity 392,551 345,207
Total shareholders' equity 850,559 802,541
Total liabilities and shareholders' equity $ 7,808,514 $ 7,453,070
Net interest income $ 156,553 $ 168,179
Net interest spread 1.92 2.34
Effect of net interest-free funding sources 0.93 0.88
Net interest margin 2.85 % 3.22 %
Ratio of average interest-earning assets to average interest-bearing liabilities 134.04 % 144.22 %
*Obligations of states and political subdivisions 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 $2.0 million and $1.7 million for the nine months ended September 30, 2024 and 2023, 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, 2024 and 2023 have been calculated using the Corporation's federal applicable rate of 21%.
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Table 2-Analysis of Changes in Net Interest Income
The rate-volume variance analysis set forth in the table below compares changes in tax-equivalent net interest income for the periods indicated by their rate and volume components. The change in interest income/expense due to both volume and rate has been allocated proportionately.
Three Months Ended Nine Months Ended
September 30, 2024 Versus 2023 September 30, 2024 Versus 2023
(Dollars in thousands) Volume
Change
Rate
Change
Total Volume
Change
Rate
Change
Total
Interest income:
Interest-earning deposits with other banks $ 1,700 $ 59 $ 1,759 $ 3,144 $ 341 $ 3,485
Obligations of states and political subdivisions (6) (3) (9) (15) (7) (22)
Other debt and equity securities (88) 254 166 (359) 906 547
Federal Home Loan Bank, Federal Reserve Bank and other stock (30) 60 30 (68) 132 64
Interest on deposits, investments and other earning assets 1,576 370 1,946 2,702 1,372 4,074
Commercial, financial and agricultural loans 35 879 914 (1,307) 3,734 2,427
Real estate-commercial and construction loans 534 2,590 3,124 5,211 10,750 15,961
Real estate-residential loans 1,789 1,068 2,857 6,503 3,376 9,879
Loans to individuals 2 22 24 4 182 186
Tax-exempt loans and leases (27) 162 135 (48) 394 346
Lease financings 80 267 347 702 719 1,421
Interest and fees on loans and leases 2,413 4,988 7,401 11,065 19,155 30,220
Total interest income 3,989 5,358 9,347 13,767 20,527 34,294
Interest expense:
Interest-bearing checking deposits 969 1,152 2,121 3,185 5,909 9,094
Money market savings 2,260 1,103 3,363 6,609 9,935 16,544
Regular savings (114) 131 17 (434) 771 337
Time deposits 3,898 1,689 5,587 16,978 7,810 24,788
Total time and interest-bearing deposits 7,013 4,075 11,088 26,338 24,425 50,763
Short-term borrowings (535) (581) (1,116) (4,223) (2,623) (6,846)
Long-term debt (757) 502 (255) 502 1,501 2,003
Subordinated notes 1 - 1 - - -
Interest on borrowings (1,291) (79) (1,370) (3,721) (1,122) (4,843)
Total interest expense 5,722 3,996 9,718 22,617 23,303 45,920
Net interest income $ (1,733) $ 1,362 $ (371) $ (8,850) $ (2,776) $ (11,626)
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Provision for Credit Losses
The provision for credit losses for the three months ended September 30, 2024 and 2023 was $1.4 million and $2.0 million, respectively. The provision for credit losses for the nine months ended September 30, 2024 and 2023 was $3.6 million and $8.8 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) September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023
Allowance for credit losses, loans and leases $ 86,041 $ 85,745 $ 85,632 $ 85,387 $ 83,837
Loans and leases held for investment 6,730,734 6,684,837 6,579,086 6,567,214 6,574,958
Allowance for credit losses, loans and leases / loans and leases held for investment 1.28 % 1.28 % 1.30 % 1.30 % 1.28 %
Noninterest Income
The following table presents noninterest income for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended Nine Months Ended
September 30, Change September 30, Change
(Dollars in thousands) 2024 2023 Amount Percent 2024 2023 Amount Percent
Trust fee income $ 2,110 $ 1,910 $ 200 10.5 % $ 6,226 $ 5,789 $ 437 7.5 %
Service charges on deposit accounts 2,037 1,816 221 12.2 5,890 5,088 802 15.8
Investment advisory commission and fee income 5,319 4,843 476 9.8 15,751 14,303 1,448 10.1
Insurance commission and fee income 5,238 4,852 386 8.0 17,606 16,447 1,159 7.0
Other service fee income 1,815 3,020 (1,205) (39.9) 11,274 9,414 1,860 19.8
Bank owned life insurance income 921 806 115 14.3 2,849 2,362 487 20.6
Net gain on sales of investment securities 18 - 18 N/M 18 - 18 N/M
Net gain on mortgage banking activities 1,296 1,216 80 6.6 3,945 2,880 1,065 37.0
Other income 1,396 228 1,168 512.3 3,166 1,921 1,245 64.8
Total noninterest income $ 20,150 $ 18,691 $ 1,459 7.8 % $ 66,725 $ 58,204 $ 8,521 14.6 %
Three and nine months ended September 30, 2024 versus 2023
Noninterest income for the three months ended September 30, 2024 was $20.2 million, an increase of $1.5 million, or 7.8%, from the three months ended September 30, 2023. Noninterest income for the nine months ended September 30, 2024 was $66.7 million, an increase of $8.5 million, or 14.6%, from the nine months ended September 30, 2023.
Investment advisory commission and fee income increased $476 thousand, or 9.8%, for the three months ended September 30, 2024 and $1.4 million, or 10.1%, for the nine months ended September 30, 2024 from the comparable periods in the prior year, primarily due to increased assets under management and supervision driven by new business and market appreciation.
Insurance commission and fee income increased $386 thousand, or 8.0%, for the three months ended September 30, 2024 and $1.2 million, or 7.0%, for the nine months ended September 30, 2024 from the comparable periods in the prior year. The increase for the three months end September 30, 2024 was primarily due to an increase in commercial lines premiums. The increase for the nine months ended September 30, 2024 was primarily due to increases in commercial lines premiums and contingent commission income of $451 thousand, which was $2.3 million and $1.9 million for the nine months ended September 30, 2024 and 2023, respectively. Contingent income is largely recognized in the first quarter of the year.
Other service fee income decreased $1.2 million, or 39.9%, for the three months ended September 30, 2024 and increased $1.9 million, or 19.8%, for the nine months ended September 30, 2024 from the comparable periods in the prior year. The decrease for the three months ended September 30, 2024 was primarily due to a $785 thousand valuation allowance recorded on mortgage servicing rights driven by the increase in prepayment speed assumptions as a result of the decrease in interest rates during the quarter. Additionally, net servicing fees on sold mortgage loans decreased by $307 thousand, primarily attributable
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to the sale of mortgage servicing rights associated with $591.1 million of serviced loans in the first quarter of 2024 and increased amortization driven by prepayments. The increase for the nine months ended September 30, 2024 was primarily due to the net gain of $3.4 million generated from the sale of mortgage servicing rights associated with these serviced loans.
Bank owned life insurance income increased $115 thousand, or 14.3%, for the three months ended September 30, 2024 and $487 thousand, or 20.6%, for the nine months ended September 30, 2024 from the comparable periods in the prior year, primarily due to purchases of new policies in the first quarter of the year. Additionally, both periods included death benefits claims of $171 thousand received during the second quarter of the year.
Net gain on mortgage banking activities increased $1.1 million, or 37.0%, for the nine months ended September 30, 2024 from the comparable period in the prior year, primarily due to increased salable volume. Service charges on deposit accounts $802 thousand, or 15.8%, for the nine months ended September 30, 2024 from the comparable period in the prior year, primarily due to increased treasury management income.
Other income increased $1.2 million for the three and nine months ended September 30, 2024, or 512.3% and 64.8%, respectively, from the comparable periods in the prior year, primarily due to increases of $705 thousand and $958 thousand in gains on the sale of Small Business Administration loans for the three and nine months ended September 30, 2024, respectively.
Noninterest Expense
The following table presents noninterest expense for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended Nine Months Ended
September 30, Change September 30, Change
(Dollars in thousands) 2024 2023 Amount Percent 2024 2023 Amount Percent
Salaries, benefits and commissions $ 30,702 $ 29,978 $ 724 2.4 % $ 92,227 $ 90,867 $ 1,360 1.5 %
Net occupancy 2,723 2,594 129 5.0 8,274 7,935 339 4.3
Equipment 1,107 1,087 20 1.8 3,306 3,066 240 7.8
Data processing 4,154 4,189 (35) (0.8) 12,810 12,355 455 3.7
Professional fees 1,579 1,763 (184) (10.4) 4,733 5,373 (640) (11.9)
Marketing and advertising 490 555 (65) (11.7) 1,621 1,548 73 4.7
Deposit insurance premiums 1,097 1,258 (161) (12.8) 3,330 3,475 (145) (4.2)
Intangible expenses 164 220 (56) (25.5) 539 726 (187) (25.8)
Restructuring charges - - - N/M - 1,330 (1,330) N/M
Other expense 6,536 7,344 (808) (11.0) 20,494 21,641 (1,147) (5.3)
Total noninterest expense $ 48,552 $ 48,988 $ (436) (0.9 %) $ 147,334 $ 148,316 $ (982) (0.7 %)
Three and nine months ended September 30, 2024 versus 2023
Noninterest expense for the three months ended September 30, 2024 was $48.6 million, a decrease of $436 thousand, or 0.9%, from the three months ended September 30, 2023. Noninterest expense for the nine months ended September 30, 2024 was $147.3 million, a decrease of $982 thousand, or 0.7%, from the nine months ended September 30, 2023. The financial results for the nine months ended September 30, 2023 included restructuring charges of $1.3 million.
Other expense decreased $808 thousand, or 11.0%, for the three months ended September 30, 2024 and $1.1 million, or 5.3%, for the nine months ended September 30, 2024 from the comparable periods in the prior year, primarily due to decreases in retirement plan costs, insurance expense and recruiter fees. Additionally, the three months ended September 30, 2024 benefited from a decrease in bank shares tax expense.
Professional fees decreased $184 thousand, or 10.4%, for the three months ended September 30, 2024 and $640 thousand, or 11.9%, for the nine months ended September 30, 2024 from the comparable periods in the prior year, primarily driven by a reduction in consultant fees. Deposit insurance premiums decreased $161 thousand, or 12.8%, for the three months ended September 30, 2024 driven by an improvement in the financial ratios that contribute to our assessment rate.
Salaries, benefits and commissions increased $724 thousand, or 2.4%, for the three months ended September 30, 2024 and $1.4 million, or 1.5%, from the comparable periods in the prior year. The increase for the three months ended September 30,
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Table of Contents
2024 was primarily due to increases in salary expense and incentive compensation due to increased profitability, partially offset by an increase in compensation capitalized driven by higher loan production. The increase for the nine months ended September 30, 2024 was primarily due to increases in incentive compensation due to increased profitability and medical claims.
Tax Provision
The Corporation recognized a tax expense of $4.8 million and $4.3 million for the three months ended September 30, 2024 and 2023, respectively, resulting in effective rates of 20.6% and 20.0% for the respective periods. The Corporation recognized a tax expense of $14.5 million and $13.4 million for the nine months ended September 30, 2024 and 2023, respectively, resulting in effective tax rates of 20.3% and 19.7% for the respective periods. The effective tax rates for the three and nine months ended September 30, 2024 and 2023 reflects the benefits of tax-exempt income from investments in municipal securities and loans and leases. The increase in the effective tax rate for the 2024 periods was primarily due to increases in the state tax rates. Additionally, the effective income tax rates for the nine months ended September 30, 2024 were favorably impacted by proceeds from BOLI death benefits.
Financial Condition
Assets
The following table presents assets at the dates indicated:
At September 30, 2024 At December 31, 2023 Change
(Dollars in thousands) Amount Percent
Cash, interest-earning deposits and federal funds sold $ 504,700 $ 249,799 $ 254,901 102.0 %
Investment securities 494,187 500,623 (6,436) (1.3)
Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost 40,235 40,499 (264) (0.7)
Loans held for sale 17,131 11,637 5,494 47.2
Loans and leases held for investment 6,730,734 6,567,214 163,520 2.5
Allowance for credit losses, loans and leases (86,041) (85,387) (654) 0.8
Premises and equipment, net 47,411 51,441 (4,030) (7.8)
Operating lease right-of-use assets 29,260 31,795 (2,535) (8.0)
Goodwill and other intangibles, net 182,668 186,460 (3,792) (2.0)
Bank owned life insurance 138,744 131,344 7,400 5.6
Accrued interest receivable and other assets 106,708 95,203 11,505 12.1
Total assets $ 8,205,737 $ 7,780,628 $ 425,109 5.5 %
Cash and Interest-Earning Deposits
Cash and interest-earning deposits increased $254.9 million, or 102.0%, from December 31, 2023, primarily due to an increase in interest-earning deposits at the Federal Reserve Bank of $249.6 million due to seasonal increases in public funds outpacing loan growth, partially offset by the repayment of long-term debt.
Investment Securities
Total investment securities at September 30, 2024 decreased $6.4 million, or 1.3%, from December 31, 2023. Maturities and pay-downs of $53.6 million, sales of $3.9 million, net amortization of purchased premiums and discounts of $820 thousand were partially offset by purchases of $42.9 million, which were primarily residential mortgage-backed securities, increases in the fair value of available-for-sale investment securities of $8.8 million and a reversal of provision for credit losses of $89 thousand.
Loans and Leases
Gross loans and leases held for investment increased $163.5 million, or 2.5%, from December 31, 2023. The growth in gross loans and leases held for investment was primarily due to increases in commercial, commercial real estate and residential
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mortgage loans, partially offset by a decrease in construction loans. For more information on the composition of the commercial loan portfolio, see "Table 4 - Loan Portfolio Overview."
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 September 30, 2024, nonaccrual loans and leases were $15.3 million and had a related allowance for credit losses on loans and leases of $1.0 million. At December 31, 2023, nonaccrual loans and leases were $20.5 million and had a related allowance for credit losses on loans and leases of $1.8 million. During the nine months ended September 30, 2024, pay-offs totaling $4.6 million were received on nonaccrual loans and leases. 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 September 30, 2024 were $820 thousand compared to $969 thousand for the same period in the prior year. Net loan and lease charge-offs for the nine months ended September 30, 2024 were $3.0 million compared to $4.3 million for the same period in the prior year. The decrease in charge-offs for the nine months ended September 30, 2024 was primarily due to $2.4 million of charge-offs related to one borrower in the first quarter of 2023.
Other real estate owned ("OREO") was $20.9 million at September 30, 2024, compared to $19.0 million at December 31, 2023, primarily due to capitalized costs on an existing OREO property, the transfer of a residential real estate property with a carrying value of $156 thousand during the quarter and the transfer of a commercial real estate property with a carrying value of $252 thousand during the second quarter of 2024. Repossessed assets were $79 thousand at September 30, 2024. The Corporation had no repossessed assets at December 31, 2023.
Table 3-Nonaccrual and Past Due Loans and Leases; Other Real Estate Owned; Repossessed Assets; and Related Ratios
The following table details information pertaining to the Corporation's nonperforming assets at the dates indicated.
(Dollars in thousands) At September 30, 2024 At December 31, 2023
Nonaccrual loans held for sale $ - $ 8
Nonaccrual loans and leases held for investment 15,319 20,519
Accruing loans and leases, 90 days or more past due 310 534
Total nonperforming loans and leases $ 15,629 $ 21,061
Other real estate owned 20,915 19,032
Repossessed assets 79 -
Total nonperforming assets $ 36,623 $ 40,093
Loans and leases held for investment $ 6,730,734 $ 6,567,214
Allowance for credit losses, loans and leases 86,041 85,387
Allowance for credit losses, loans and leases / loans and leases held for investment 1.28 % 1.30 %
Nonaccrual loans and leases / loans and leases held for investment 0.23 % 0.31 %
Allowance for credit losses, loans and leases / nonaccrual loans and leases 561.66 % 415.97 %
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The following table provides additional information on the Corporation's nonaccrual loans held for investment:
(Dollars in thousands) At September 30, 2024 At December 31, 2023
Nonaccrual loans and leases, held for investment $ 15,319 $ 20,519
Nonaccrual loans and leases with partial charge-offs 349 814
Life-to-date partial charge-offs on nonaccrual loans and leases 682 885
Reserves on individually analyzed loans 1,033 1,787
Table 4-Loan Portfolio Overview
The following table provides summarized detail related to outstanding commercial loan balances segmented by industry description as of September 30, 2024:
(Dollars in thousands) At September 30, 2024
Industry Description Total Outstanding Balance % of Commercial Loan Portfolio
CRE - Retail $ 458,230 8.6 %
Animal Production 384,554 7.2
CRE - Multi-family 340,181 6.4
CRE - 1-4 Family Residential Investment 295,454 5.6
CRE - Office 294,508 5.6
CRE - Industrial / Warehouse 254,019 4.8
Hotels & Motels (Accommodation) 186,130 3.5
Specialty Trade Contractors 180,486 3.4
Nursing and Residential Care Facilities 167,467 3.2
Education 167,282 3.2
Motor Vehicle and Parts Dealers 129,799 2.4
Repair and Maintenance 127,927 2.4
Merchant Wholesalers, Durable Goods 125,009 2.4
Homebuilding (tract developers, remodelers) 120,040 2.2
CRE - Mixed-Use - Residential 110,137 2.1
Crop Production 104,343 2.0
Wood Product Manufacturing 93,505 1.8
Food Services and Drinking Places 88,178 1.7
Real Estate Lenders, Secondary Market Financing 85,171 1.6
Rental and Leasing Services 79,876 1.5
Religious Organizations, Advocacy Groups 73,802 1.4
Fabricated Metal Product Manufacturing 72,794 1.4
CRE - Mixed-Use - Commercial 72,268 1.4
Administrative and Support Services 71,787 1.4
Personal and Laundry Services 71,184 1.3
Merchant Wholesalers, Nondurable Goods 69,363 1.3
Amusement, Gambling, and Recreation Industries 69,052 1.3
Miniwarehouse / Self-Storage 65,176 1.2
Food Manufacturing 61,472 1.1
Truck Transportation 52,570 1.0
Industries with >$50 million in outstandings $ 4,471,764 84.3 %
Industries with <$50 million in outstandings $ 830,652 15.7 %
Total Commercial Loans $ 5,302,416 100.0 %
Consumer Loans and Lease Financings Total Outstanding Balance
Real Estate-Residential Secured for Personal Purpose $ 969,562
Real Estate-Home Equity Secured for Personal Purpose 182,901
Loans to Individuals 26,794
Lease Financings 249,061
Total Consumer Loans and Lease Financings $ 1,428,318
Total $ 6,730,734
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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 $175 thousand and $229 thousand for the three months ended September 30, 2024 and 2023, respectively. The amortization of core deposit and customer-related intangibles was $350 thousand and $458 thousand for the nine months ended September 30, 2024 and 2023, respectively. See Note 5 to the Condensed Unaudited Consolidated Financial Statements, "Goodwill and Other Intangible Assets," for a summary of intangible assets at September 30, 2024 and December 31, 2023.
The Corporation also has goodwill with a net carrying value of $175.5 million at September 30, 2024 and December 31, 2023, 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 nine months ended September 30, 2024 or 2023. 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 $7.4 million, or 5.6%, from December 31, 2023, primarily due to $5.7 million of policies purchased during the first quarter of 2024.
Other Assets
Other assets increased $11.5 million, or 12.1%, from December 31, 2023, primarily due to increases of $3.9 million in pension plan assets and $5.2 million in prepaid expenses.
Liabilities
The following table presents liabilities at the dates indicated:
(Dollars in thousands) At September 30, 2024 At December 31, 2023 Change
Amount Percent
Deposits $ 6,854,148 $ 6,375,781 $ 478,367 7.5 %
Short-term borrowings 8,256 6,306 1,950 30.9
Long-term debt 225,000 310,000 (85,000) (27.4)
Subordinated notes 149,136 148,761 375 0.3
Operating lease liabilities 32,246 34,851 (2,605) (7.5)
Accrued interest payable and other liabilities 59,880 65,721 (5,841) (8.9)
Total liabilities $ 7,328,666 $ 6,941,420 $ 387,246 5.6 %
Deposits
Total deposits increased $478.4 million, or 7.5%, from December 31, 2023, primarily due to increases in commercial, brokered and seasonal public funds deposits. At September 30, 2024, noninterest bearing deposits totaling $1.3 billion represented 19.3% of total deposits compared to $1.5 billion representing 23.0% of total deposits at December 31, 2023. At September 30, 2024, unprotected deposits, which excludes insured, internal, and collateralized deposit accounts, totaled $1.4 billion and represented 20.3% of total deposits compared to $1.5 billion at December 31, 2023 representing 23.3% of total deposits.
Borrowings
Total borrowings decreased $82.7 million, or 17.8%, from December 31, 2023, primarily due to pay-downs of long-term FHLB advances of $85.0 million, partially offset by an increase of $2.0 million in customer repurchase agreements. These
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borrowings were replaced with lower cost deposits during the year.
Other Liabilities
Other liabilities decreased $5.8 million, or 8.9%, from December 31, 2023, primarily due to the termination of an interest rate swap.
Shareholders' Equity
The following table presents total shareholders' equity at the dates indicated:
(Dollars in thousands) At September 30, 2024 At December 31, 2023 Change
Amount Percent
Common stock $ 157,784 $ 157,784 $ - - %
Additional paid-in capital 301,262 301,066 196 0.1
Retained earnings 512,938 474,691 38,247 8.1
Accumulated other comprehensive loss (41,623) (50,646) 9,023 (17.8)
Treasury stock (53,290) (43,687) (9,603) 22.0
Total shareholders' equity $ 877,071 $ 839,208 $ 37,863 4.5 %
Total shareholders' equity increased $37.9 million, or 4.5%, from December 31, 2023. Retained earnings at September 30, 2024 increased by $38.2 million primarily due to net income of $57.0 million offset by $18.5 million in cash dividends paid during the nine months ended September 30, 2024. Accumulated other comprehensive loss decreased by $9.0 million, which was primarily attributable to increases in the fair value of available-for-sale investment securities of $7.0 million, net of tax. Treasury stock increased $9.6 million from December 31, 2023, related to repurchases of 664,201 shares at a cost of $14.7 million, offset by $5.1 million of 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 $22.5 million and $21.7 million for the three months ended September 30, 2024 and 2023, respectively, and pre-tax income of $71.1 million and $67.0 million for the nine months ended September 30, 2024 and 2023, respectively. See the section of this 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 noninterest income of $7.5 million and $6.8 million for the three months ended September 30, 2024 and 2023, respectively, and $22.1 million and $20.2 million for the nine months ended September 30, 2024 and 2023, respectively. Noninterest expense was $5.6 million and $5.1 million for the three months ended September 30, 2024 and 2023, respectively, and $16.6 million and $14.8 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in noninterest income for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was due to new customer relationships and appreciation of assets under management and supervision as a majority of investment advisory fees are billed based on the prior quarter-end assets under management and supervision balance. The increase in noninterest expense for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was due to increase in salary and benefits expense as we continue to invest in revenue-producing positions. Assets under management and supervision were $5.3 billion as of September 30, 2024, $5.0 billion as of June 30, 2024, $4.3 billion as of September 30, 2023 and $4.5 billion as of June 30, 2023.
The Insurance segment reported noninterest income of $5.2 million and $4.9 million for the three months ended September 30, 2024 and 2023, respectively, and $17.7 million and $16.8 million for the nine months ended September 30, 2024 and 2023, respectively. Noninterest expense was $4.0 million for the three months ended September 30, 2024 and 2023, and $12.1 million and $11.9 million for the nine months ended September 30, 2024 and 2023, respectively. The increase for the nine months ended September 30, 2024 included increases in commercial lines premiums of $745 thousand and contingent commission
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income of $451 thousand, which was $2.3 million and $1.9 million for the nine months ended September 30, 2024 and 2023, 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.
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 September 30, 2024.
Table 5-Regulatory Capital
The Corporation's and Bank's actual and required capital ratios as of September 30, 2024 and December 31, 2023 under regulatory capital rules were as follows.
Actual For Capital Adequacy
Purposes
To Be Well-Capitalized
Under Prompt
Corrective Action
Provisions
(Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
At September 30, 2024
Total Capital (to Risk-Weighted Assets):
Corporation $ 984,852 14.27 % $ 552,226 8.00 % $ 690,282 10.00 %
Bank 852,945 12.41 549,899 8.00 687,374 10.00
Tier 1 Capital (to Risk-Weighted Assets):
Corporation 751,271 10.88 414,169 6.00 552,226 8.00
Bank 768,500 11.18 412,424 6.00 549,899 8.00
Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation 751,271 10.88 310,627 4.50 448,683 6.50
Bank 768,500 11.18 309,318 4.50 446,793 6.50
Tier 1 Capital (to Average Assets):
Corporation 751,271 9.53 315,213 4.00 394,016 5.00
Bank 768,500 9.78 314,367 4.00 392,959 5.00
At December 31, 2023
Total Capital (to Risk-Weighted Assets):
Corporation $ 953,889 13.90 % $ 549,160 8.00 % $ 686,450 10.00 %
Bank 810,449 11.86 546,782 8.00 683,478 10.00
Tier 1 Capital (to Risk-Weighted Assets):
Corporation 726,478 10.58 411,870 6.00 549,160 8.00
Bank 731,799 10.71 410,087 6.00 546,782 8.00
Tier 1 Common Capital (to Risk-Weighted Assets):
Corporation 726,478 10.58 308,903 4.50 446,193 6.50
Bank 731,799 10.71 307,565 4.50 444,260 6.50
Tier 1 Capital (to Average Assets):
Corporation 726,478 9.36 310,520 4.00 388,150 5.00
Bank 731,799 9.45 309,753 4.00 387,191 5.00
At September 30, 2024 and December 31, 2023, the Corporation and the Bank continued to meet all capital adequacy requirements to which they are subject. At September 30, 2024, the Bank was categorized as "well capitalized" under the
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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 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 minimize interest rate risk and 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 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, unencumbered cash and cash equivalents, were $492.3 million and $241.5 million at September 30, 2024 and December 31, 2023, respectively. Unencumbered securities classified as available-for-sale, which provide additional sources of liquidity, totaled $32.3 million and $23.3 million at September 30, 2024 and December 31, 2023, respectively. Further, the Corporation and its subsidiaries had committed borrowing capacity from the Federal Home Loan Bank and Federal Reserve Bank of $3.6 billion and $3.4 billion at September 30, 2024 and December 31, 2023, respectively, of which $1.8 billion and $1.9 billion was available as of September 30, 2024 and December 31, 2023, respectively. The Corporation and its subsidiaries also maintained uncommitted funding sources from correspondent banks of $468.0 million at September 30, 2024 and $369.0 million at December 31, 2023. Future availability under these uncommitted funding sources is subject to the prerogatives of the granting banks and may be withdrawn at will.
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Sources of Funds
Core deposits continue to be the largest significant funding source for the Corporation. These deposits are primarily generated from individuals, businesses, public funds 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 and the Federal Reserve Bank of Philadelphia, and brokered deposits and other similar sources.
Cash Requirements
The Corporation has cash requirements for various financial obligations, including contractual obligations and commitments that require cash payments. The most significant contractual obligations, in both the under and over one-year time period, are for the Bank to repay certificates of deposit and short- 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 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 September 30, 2024. A detailed discussion of market risk is provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" including Liquidity and Interest Sensitivity, in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023.
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 September 30, 2024.
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 September 30, 2024 that materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting.
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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.
Item 1A. Risk Factors
There have been no material changes in risk factors applicable to the Corporation from those disclosed in "Risk Factors" in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2023.
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 1
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
July 1 - 31, 2024 21,603 $ 22.95 21,603 674,771
August 1 - 31, 2024 73,411 26.72 73,411 601,360
September 1 - 30, 2024 61,714 28.08 61,714 539,646
Total 156,728 $ 26.74 156,728
1.Average price paid per share includes stock repurchase excise tax.
On October 26, 2022, the Corporation's Board of Directors approved the repurchase of 1,000,000 shares, or approximately 3.4% of the Corporation's common stock outstanding as of September 30, 2022. On October 23, 2024, the Corporation's Board of Directors approved the repurchase of an additional 1,000,000 shares, or approximately 3.4% of the Corporation's common stock outstanding as of September 30, 2024. 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 stock repurchase plan has no scheduled expiration date, and the Board of Directors has the right to suspend or discontinue the plan 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 September 30, 2024 were as follows:
Period Total Number of Shares Purchased Average Price Paid per Share
July 1 - 31, 2024 - $ -
August 1 - 31, 2024 - -
September 1 - 30, 2024 - -
Total - $ -
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
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Not Applicable.
Item 5. Other Information
Securities Trading Plans of Directors and Executive Officers
During the three months ended September 30, 2024, 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
Exhibit 3.2
Exhibit 31.1
Certification of Jeffrey M. Schweitzer, Chairman, 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, Chairman, 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 September 30, 2024, 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 September 30, 2024, 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: October 29, 2024 /s/ Jeffrey M. Schweitzer
Jeffrey M. Schweitzer
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
Date: October 29, 2024 /s/ Brian J. Richardson
Brian J. Richardson
Senior Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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