Univest(UVSP) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for Univest Financial Corporation Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements of Univest Financial Corporation, including balance sheets, income statements, comprehensive income statements, statements of changes in shareholders' equity, and cash flow statements, along with detailed notes. These statements provide a snapshot of the company's financial position and performance for the three and six months ended June 30, 2025, and comparable prior periods Condensed Consolidated Balance Sheets This statement presents the company's financial position, including assets, liabilities, and shareholders' equity, at specific reporting dates | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Assets | | | | Cash and cash equivalents | $160,365 | $328,844 | | Total assets | $7,939,056 | $8,128,417 | | Liabilities | | | | Total deposits | $6,582,660 | $6,759,259 | | Total liabilities | $7,022,323 | $7,241,116 | | Shareholders' Equity | | | | Total shareholders' equity | $916,733 | $887,301 | - Total assets decreased by $189.36 million (2.3%) from December 31, 2024, primarily due to a significant decrease in cash and cash equivalents[10][186] - Total liabilities decreased by $218.79 million (3.0%), mainly driven by a reduction in total deposits and long-term debt[10][200] - Total shareholders' equity increased by $29.43 million (3.3%), primarily due to an increase in retained earnings and a decrease in accumulated other comprehensive loss[10][204][205] Condensed Consolidated Statements of Income This statement details the company's revenues, expenses, and net income over specific reporting periods | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Total interest income | $105,706 | $99,832 | $209,122 | $198,441 | | Total interest expense | $46,165 | $48,805 | $92,800 | $95,947 | | Net interest income | $59,541 | $51,027 | $116,322 | $102,494 | | Provision for credit losses | $5,694 | $707 | $8,005 | $2,139 | | Total noninterest income | $21,501 | $20,980 | $43,916 | $46,575 | | Total noninterest expense | $50,332 | $48,708 | $99,660 | $98,782 | | Net income | $19,978 | $18,107 | $42,373 | $38,412 | | Basic EPS | $0.69 | $0.62 | $1.46 | $1.31 | | Diluted EPS | $0.69 | $0.62 | $1.45 | $1.30 | - Net income increased by 10.3% for both the three and six months ended June 30, 2025, compared to the prior year periods, reaching $19.98 million and $42.37 million, respectively[12][157][159] - Diluted EPS increased by 11.3% to $0.69 for the three months and 11.5% to $1.45 for the six months ended June 30, 2025, year-over-year[12][157][159] Condensed Consolidated Statements of Comprehensive Income This statement reports net income and other comprehensive income components, providing a complete view of changes in equity from non-owner sources | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income | $19,978 | $18,107 | $42,373 | $38,412 | | Other comprehensive income (loss), net of tax | $2,953 | $616 | $9,023 | $(3,478) | | Total comprehensive income | $22,931 | $18,723 | $51,396 | $34,934 | - Total comprehensive income significantly increased for both periods, reaching $22.93 million (3 months) and $51.40 million (6 months) in 2025, driven by net income growth and positive other comprehensive income[13][16] - Other comprehensive income, net of tax, showed a substantial positive change, moving from a loss of $3.48 million in the six months ended June 30, 2024, to a gain of $9.02 million in the same period of 2025, primarily due to net unrealized gains on available-for-sale investment securities[16][205] Condensed Consolidated Statements of Changes in Shareholders' Equity This statement outlines changes in each component of shareholders' equity, including net income, dividends, and other comprehensive income | Metric | Balance at Dec 31, 2024 (Thousands) | Net Income (Thousands) | Other Comprehensive Income (Loss) (Thousands) | Cash Dividends Declared (Thousands) | Purchases of Treasury Stock (Thousands) | Balance at June 30, 2025 (Thousands) | | :----------------------------------- | :---------------------------------- | :--------------------- | :-------------------------------------------- | :---------------------------------- | :------------------------------------ | :--------------------------------- | | Total shareholders' equity | $887,301 | $42,373 | $9,023 | $(12,441) | $(11,440) | $916,733 | - Shareholders' equity increased by $29.43 million from December 31, 2024, to June 30, 2025, primarily driven by net income and other comprehensive income, partially offset by cash dividends and treasury stock repurchases[18][205] - The company repurchased 394,517 shares of treasury stock at a cost of $11.44 million during the six months ended June 30, 2025[18][205] Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities over specific periods | Metric | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $38,858 | $8,157 | | Net cash provided by (used in) investing activities | $24,109 | $(109,061) | | Net cash (used in) provided by financing activities | $(231,446) | $42,016 | | Net decrease in cash and cash equivalents | $(168,479) | $(58,888) | | Cash and cash equivalents at end of period | $160,365 | $190,911 | - Net cash provided by operating activities significantly increased to $38.86 million for the six months ended June 30, 2025, compared to $8.16 million in the prior year[22] - Investing activities shifted from a net cash outflow of $109.06 million in 2024 to a net cash inflow of $24.11 million in 2025, primarily due to changes in loans and leases[22] - Financing activities resulted in a net cash outflow of $231.45 million in 2025, a significant change from the $42.02 million inflow in 2024, mainly due to a net decrease in deposits and repayment of long-term debt[22] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements - The financial statements are prepared in conformity with U.S. GAAP, requiring management estimates, particularly for fair value of available-for-sale investment securities and allowance for credit losses on loans and leases[24] - The Corporation does not expect recent FASB ASUs (2023-06, 2023-09, 2024-03, 2024-04) to have a material impact on its financial statements[25][26][28][29] Note 2. Earnings per Share This note provides details on the calculation of basic and diluted earnings per share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic earnings per share | $0.69 | $0.62 | $1.46 | $1.31 | | Diluted earnings per share | $0.69 | $0.62 | $1.45 | $1.30 | | Weighted-average shares outstanding (basic, thousands) | 28,859 | 29,247 | 28,929 | 29,330 | | Weighted-average shares outstanding (diluted, thousands) | 29,047 | 29,353 | 29,155 | 29,453 | - Basic and diluted EPS increased year-over-year for both the three and six-month periods, reflecting improved net income[31] Note 3. Investment Securities This note details the composition, fair value, and unrealized gains or losses of the company's investment securities portfolio | Security Type | Amortized Cost (June 30, 2025, Thousands) | Fair Value (June 30, 2025, Thousands) | Amortized Cost (Dec 31, 2024, Thousands) | Fair Value (Dec 31, 2024, Thousands) | | :----------------------------------- | :---------------------------------------- | :------------------------------------ | :--------------------------------------- | :----------------------------------- | | Held-to-maturity securities | $128,455 | $113,166 | $134,111 | $115,007 | | Available-for-sale securities | $400,676 | $366,421 | $402,651 | $357,361 | | Total | $529,131 | $479,587 | $536,762 | $472,368 | - At June 30, 2025, held-to-maturity securities in an unrealized loss position totaled $111.9 million (unrealized losses of $15.3 million), primarily federal agency mortgage-backed securities[37] - Available-for-sale securities in an unrealized loss position were $286.5 million (unrealized losses of $34.9 million), mainly federal agency mortgage-backed securities and investment grade corporate bonds[38] - The allowance for credit losses on available-for-sale corporate bonds decreased from $(839) thousand at December 31, 2024, to $(17) thousand at June 30, 2025, largely due to a $719 thousand reversal on investment grade corporate bonds[40][41] Note 4. Loans and Leases This note provides a breakdown of the loan and lease portfolio, including asset quality and allowance for credit losses | Loan Category | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Commercial, financial and agricultural | $1,052,246 | $1,037,835 | | Real estate-commercial | $3,485,615 | $3,530,451 | | Real estate-construction | $302,424 | $274,483 | | Real estate-residential secured for business purpose | $535,210 | $536,095 | | Real estate-residential secured for personal purpose | $984,166 | $994,972 | | Real estate-home equity secured for personal purpose | $195,014 | $186,836 | | Loans to individuals | $14,069 | $21,250 | | Lease financings | $232,441 | $244,661 | | Total loans and leases held for investment | $6,801,185 | $6,826,583 | | Less: Allowance for credit losses | $(86,989) | $(87,091) | | Net loans and leases held for investment | $6,714,196 | $6,739,492 | - Total loans and leases held for investment decreased by $25.4 million (0.4%) from December 31, 2024, primarily due to decreases in commercial real estate and residential mortgage loans, partially offset by increases in commercial, construction, and home equity loans[43][189] - Nonaccrual loans and leases increased significantly to $27.91 million at June 30, 2025, from $12.67 million at December 31, 2024, largely due to a $23.7 million commercial loan placed on nonaccrual status with a $7.3 million charge-off[47][172][192] - The allowance for credit losses on loans and leases remained stable at 1.28% of total loans and leases held for investment at June 30, 2025, and December 31, 2024[173][196] Note 5. Goodwill and Other Intangible Assets This note details the company's goodwill and other intangible assets, including amortization and impairment information | Intangible Asset Type | Net Carrying Amount (June 30, 2025, Thousands) | Net Carrying Amount (Dec 31, 2024, Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Goodwill | $175,510 | $175,510 | | Core deposit intangibles | $96 | $191 | | Customer related intangibles | $962 | $1,128 | | Servicing rights | $6,909 | $6,990 | | Total amortized intangible assets | $7,967 | $8,309 | - Goodwill remained unchanged at $175.51 million, with no impairment recognized during the six months ended June 30, 2025[79][199] - Amortization expense for core deposit and customer-related intangibles was $261 thousand for the six months ended June 30, 2025, down from $350 thousand in the prior year[198] - Servicing rights had a net carrying amount of $6.91 million at June 30, 2025, with an estimated amortization expense of $1.12 million for the remainder of 2025[79][81][130] Note 6. Deposits This note provides a breakdown of deposit types, interest rates, and changes in deposit balances | Deposit Type | Amount (June 30, 2025, Thousands) | Weighted Average Interest Rate (June 30, 2025) | Amount (Dec 31, 2024, Thousands) | Weighted Average Interest Rate (Dec 31, 2024) | | :----------------------------------- | :-------------------------------- | :--------------------------------------------- | :------------------------------- | :-------------------------------------------- | | Noninterest-bearing deposits | $1,461,189 | 0.00% | $1,414,635 | 0.00% | | Demand deposits | $2,896,516 | 3.31% | $3,186,597 | 3.25% | | Savings deposits | $723,996 | 0.45% | $704,321 | 0.44% | | Time deposits | $1,500,959 | 4.04% | $1,453,706 | 4.40% | | Total deposits | $6,582,660 | 2.43% | $6,759,259 | 2.52% | - Total deposits decreased by $176.6 million (2.6%) from December 31, 2024, primarily due to decreases in consumer and public funds deposits, partially offset by increases in commercial and brokered deposits[201] - Noninterest-bearing deposits increased to $1.46 billion, representing 22.2% of total deposits at June 30, 2025, up from 20.9% at December 31, 2024[201] - The weighted average interest rate on total deposits decreased to 2.43% at June 30, 2025, from 2.52% at December 31, 2024[82] Note 7. Borrowings This note details the company's short-term and long-term borrowings, including interest rates and available capacity | Borrowing Type | Balance (June 30, 2025, Thousands) | Weighted Average Interest Rate (June 30, 2025) | Balance (Dec 31, 2024, Thousands) | Weighted Average Interest Rate (Dec 31, 2024) | | :----------------------------------- | :--------------------------------- | :--------------------------------------------- | :-------------------------------- | :-------------------------------------------- | | Short-term borrowings | $6,271 | 0.05% | $11,181 | 0.05% | | Long-term debt (FHLB advances) | $200,000 | 4.20% | $225,000 | 4.35% | | Subordinated notes | $149,511 | 6.08% | $149,261 | 6.08% | - Total borrowings decreased by $29.7 million (7.7%) from December 31, 2024, primarily due to $75.0 million in maturities of long-term FHLB advances, partially offset by $50.0 million in new FHLB advances[202] - The Corporation had $2.3 billion in available borrowing capacity from the FHLB and $414.5 million from the Federal Reserve Bank at June 30, 2025[85][87] Note 8. Retirement Plans and Other Postretirement Benefits This note outlines the costs and obligations associated with the company's retirement and postretirement benefit plans | Metric | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | | Retirement Plans Net periodic benefit (income) cost | $(184) | $86 | | Other Postretirement Benefits Net periodic benefit (income) cost | $27 | $25 | - Net periodic benefit cost for Retirement Plans shifted from an expense of $86 thousand in 2024 to an income of $(184) thousand in 2025 for the six-month period[91] - The Corporation expects to contribute $156 thousand to Retirement Plans and $107 thousand to Other Postretirement Benefit Plans in 2025[92] Note 9. Stock-Based Incentive Plan This note describes the company's stock-based compensation arrangements, including expense recognition and outstanding awards | Metric | Six Months Ended June 30, 2025 | | :----------------------------------- | :----------------------------- | | Nonvested stock units at Dec 31, 2024 | 501,679 | | Granted | 196,666 | | Vested | (164,280) | | Nonvested stock units at June 30, 2025 | 531,375 | | Unrecognized compensation cost (thousands) | $8,807 | | Weighted-average period remaining (years) | 2.1 | - Stock-based compensation expense for restricted stock units was $2.25 million for the six months ended June 30, 2025, slightly up from $2.23 million in the prior year[96] - The total unrecognized compensation expense related to nonvested restricted stock units was $8.81 million at June 30, 2025, with a weighted-average recognition period of 2.1 years[96] Note 10. Accumulated Other Comprehensive (Loss) Income This note details the components of accumulated other comprehensive income (loss) and their changes over the period | Component | Balance, Dec 31, 2024 (Thousands) | Other Comprehensive Income (Loss) (Thousands) | Reclassification Adjustment (Thousands) | Balance, June 30, 2025 (Thousands) | | :----------------------------------- | :-------------------------------- | :------------------------------------ | :------------------------------------ | :------------------------------- | | Net Unrealized Losses on Available-for-Sale Investment Securities | $(35,117) | $8,068 | — | $(27,049) | | Net Change Related to Derivatives Used for Cash Flow Hedges | $(2,422) | — | $896 | $(1,526) | | Net Change Related to Defined Benefit Pension Plans | $(6,453) | $59 | — | $(6,394) | | Accumulated Other Comprehensive Loss | $(43,992) | $8,127 | $896 | $(34,969) | - Accumulated other comprehensive loss decreased by $9.02 million from December 31, 2024, to June 30, 2025, primarily due to $8.07 million in net unrealized gains on available-for-sale investment securities[97][205] Note 11. Derivative Instruments and Hedging Activities This note describes the company's use of derivative instruments and hedging strategies, including their fair values and impact on financial statements | Derivative Type | Notional Amount (June 30, 2025, Thousands) | Fair Value (June 30, 2025, Thousands) | Notional Amount (Dec 31, 2024, Thousands) | Fair Value (Dec 31, 2024, Thousands) | | :----------------------------------- | :--------------------------------------- | :------------------------------------ | :---------------------------------------- | :----------------------------------- | | Credit derivatives | $839,335 | $(79) | $860,423 | $(67) | | Interest rate locks with customers | $31,973 | $359 | $23,291 | $214 | | Forward loan sale commitments | $49,747 | $(51) | $39,944 | $12 | | Total | $921,055 | $229 | $923,658 | $226 | - The Corporation terminated an interest rate swap (cash flow hedge) with a notional amount of $250.0 million on August 2, 2024, incurring an unwind fee of $4.0 million[99] - Credit derivatives, not designated as hedging instruments, had a notional amount of $839.3 million and a fair value liability of $79 thousand at June 30, 2025[101][104] Note 12. Fair Value Disclosures This note provides information on the fair value measurements of financial instruments, categorized by valuation input levels | Asset/Liability Type | Level 1 (Thousands) | Level 2 (Thousands) | Level 3 (Thousands) | Total Fair Value (Thousands) | | :----------------------------------- | :------------------ | :------------------ | :------------------ | :--------------------------- | | Assets (June 30, 2025) | | | | | | Available-for-sale securities | $0 | $366,421 | $0 | $366,421 | | Equity securities | $1,801 | $0 | $0 | $1,801 | | Loans held for sale | $0 | $17,774 | $0 | $17,774 | | Interest rate locks with customers | $0 | $359 | $0 | $359 | | Liabilities (June 30, 2025) | | | | | | Credit derivatives | $0 | $0 | $79 | $79 | | Forward loan sale commitments | $0 | $51 | $0 | $51 | | Assets (Dec 31, 2024) | | | | | | Available-for-sale securities | $0 | $357,361 | $0 | $357,361 | | Equity securities | $2,506 | $0 | $0 | $2,506 | | Loans held for sale | $0 | $16,653 | $0 | $16,653 | | Interest rate locks with customers | $0 | $214 | $0 | $214 | | Forward loan sale commitments | $0 | $12 | $0 | $12 | | Liabilities (Dec 31, 2024) | | | | | | Contingent consideration liability | $0 | $0 | $635 | $635 | | Credit derivatives | $0 | $0 | $67 | $67 | - The Corporation utilizes a fair value hierarchy (Level 1, 2, 3) to measure financial instruments, maximizing observable inputs[107][108][109] - Individually analyzed loans held for investment and other real estate owned are primarily classified within Level 3 due to unobservable inputs[122][127][132] - The contingent consideration liability related to the Sheaffer acquisition was fully paid during the six months ended June 30, 2025, resulting in a zero balance[120][121] Note 13. Segment Reporting This note presents financial information for the company's operating segments, including revenues, expenses, and pre-tax income | Segment | Pre-Tax Income (3 Months Ended June 30, 2025, Thousands) | Pre-Tax Income (3 Months Ended June 30, 2024, Thousands) | Pre-Tax Income (6 Months Ended June 30, 2025, Thousands) | Pre-Tax Income (6 Months Ended June 30, 2024, Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Banking | $26,617 | $24,086 | $52,701 | $48,644 | | Wealth Management | $1,776 | $827 | $3,775 | $2,756 | | Insurance | $964 | $1,075 | $3,404 | $4,187 | | Other | $(4,341) | $(3,396) | $(7,307) | $(7,439) | | Consolidated | $25,016 | $22,592 | $52,573 | $48,148 | - The Banking segment's pre-tax income increased by 10.5% for the three months and 8.3% for the six months ended June 30, 2025, driven by higher net interest income[138][142][207] - Wealth Management pre-tax income grew significantly by 114.7% (3 months) and 37.0% (6 months) due to new customer relationships and appreciation of assets under management and supervision, which reached $5.4 billion at June 30, 2025[138][142][208] - The Insurance segment's pre-tax income decreased by 10.3% (3 months) and 18.7% (6 months), primarily due to a $701 thousand decrease in contingent income[138][142][209] Note 14. Contingencies This note discloses potential liabilities arising from legal actions and other contingent events - The Corporation is subject to various legal actions but does not expect them to have a material adverse effect on its operations, financial position, or cash flows[148] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Corporation's financial performance and condition for the three and six months ended June 30, 2025, compared to the prior year. It covers key financial metrics, asset quality, liquidity, capital adequacy, and segment performance, highlighting the drivers behind changes in net interest income, noninterest income, and expenses Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements regarding goals, expectations, business plans, financial performance, and risks, which are subject to various business, economic, and competitive uncertainties[150] - Key risks include operating, legal, and regulatory risks; general economic conditions; legislative and accounting changes; interest rate volatility; and cybersecurity breaches[150] Critical Accounting Policies This section identifies the accounting policies that require significant judgment and estimation by management - The Corporation identifies fair value measurement of available-for-sale investment securities and the calculation of the allowance for credit losses on loans and leases as critical accounting policies[153] General This section provides an overview of Univest Financial Corporation's business, subsidiaries, and primary revenue sources - Univest Financial Corporation is a Pennsylvania bank holding company, with its primary subsidiary being Univest Bank and Trust Co., offering banking, wealth management, and insurance services[154][155] - Revenues are primarily derived from lending and depository services, as well as fee-based income from trust, insurance, mortgage banking, and investment services[156] Executive Overview This section summarizes the company's key financial performance metrics and highlights significant changes for the reporting periods | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change Amount | Change Percent | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------ | :------------- | | Net income (thousands) | $19,978 | $18,107 | $1,871 | 10.3% | | Diluted EPS | $0.69 | $0.62 | $0.07 | 11.3% | | Return on average assets | 1.00% | 0.94% | 6 BP | 6.4% | | Return on average equity | 8.82% | 8.62% | 20 BP | 2.3% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Net income (thousands) | $42,373 | $38,412 | $3,961 | 10.3% | | Diluted EPS | $1.45 | $1.30 | $0.15 | 11.5% | | Return on average assets | 1.07% | 1.00% | 7 BP | 7.0% | | Return on average equity | 9.47% | 9.16% | 31 BP | 3.4% | - Net income and diluted EPS increased by over 10% for both the three and six-month periods ended June 30, 2025, compared to the prior year[157][159] - Return on average assets and equity also improved, indicating enhanced profitability and efficiency[157] - Six-month results for 2025 included $1.1 million in tax-free bank owned life insurance death benefits, while 2024 included a $3.4 million net gain from the sale of mortgage servicing rights[160] Results of Operations This section analyzes the company's financial performance, focusing on net interest income, noninterest income, and expenses Net Interest Income This section analyzes the components of net interest income, including interest earned on assets and interest paid on liabilities | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net interest income (tax-equivalent) | $59,957 | $51,311 | $117,124 | $103,061 | | Net interest margin (tax-equivalent) | 3.20% | 2.84% | 3.14% | 2.86% | | Total interest income | $106,122 | $100,116 | $209,924 | $199,008 | | Total interest expense | $46,165 | $48,805 | $92,800 | $95,947 | - Tax-equivalent net interest income increased by $8.6 million (16.9%) for the three months and $14.1 million (13.6%) for the six months ended June 30, 2025, driven by higher average loan balances and increased yields on interest-earning assets, coupled with a reduction in the overall cost of funds[162] - The net interest margin (tax-equivalent) improved to 3.20% (3 months) and 3.14% (6 months) in 2025, up from 2.84% and 2.86% in 2024, respectively[163] - Interest expense on deposits decreased for both periods, contributing to the improved net interest income[164][167] Provision for Credit Losses This section discusses the provision for credit losses and its impact on the allowance for credit losses and asset quality | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Provision for credit losses | $5,694 | $707 | $8,005 | $2,139 | | Allowance for credit losses / loans and leases held for investment | 1.28% | 1.28% | 1.28% | 1.28% | - The provision for credit losses significantly increased to $5.7 million (3 months) and $8.0 million (6 months) in 2025, primarily due to a $7.3 million charge-off on a commercial loan relationship[172] - Despite the increased provision, the allowance for credit losses as a percentage of loans and leases held for investment remained stable at 1.28%[173] Noninterest Income This section details the various sources of noninterest income, such as service charges, advisory fees, and mortgage banking activities | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------ | :------------- | | Total noninterest income | $21,501 | $20,980 | $521 | 2.5% | | Service charges on deposit accounts | $2,258 | $1,982 | $276 | 13.9% | | Investment advisory commission and fee income | $5,460 | $5,238 | $222 | 4.2% | | Net gain on mortgage banking activities | $981 | $1,710 | $(729) | (42.6%) | | Metric | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :------------------------------------- | :------------------------------------- | :------------ | :------------- | | Total noninterest income | $43,916 | $46,575 | $(2,659) | (5.7%) | | Other service fee income | $5,854 | $9,459 | $(3,605) | (38.1%) | | Bank owned life insurance income | $2,971 | $1,928 | $1,043 | 54.1% | - Total noninterest income increased by 2.5% for the three months but decreased by 5.7% for the six months ended June 30, 2025[174][175] - The six-month decrease was primarily due to a $3.4 million net gain from the sale of mortgage servicing rights in Q1 2024, which was not repeated in 2025[179] - Bank owned life insurance income increased by $1.0 million (54.1%) for the six months, driven by $1.1 million in death benefits claims[180] Noninterest Expense This section analyzes the company's noninterest expenses, including salaries, benefits, and other operating costs | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------ | :------------- | | Total noninterest expense | $50,332 | $48,708 | $1,624 | 3.3% | | Salaries, benefits and commissions | $31,536 | $30,187 | $1,349 | 4.5% | | Metric | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :------------------------------------- | :------------------------------------- | :------------ | :------------- | | Total noninterest expense | $99,660 | $98,782 | $878 | 0.9% | | Salaries, benefits and commissions | $62,362 | $61,525 | $837 | 1.4% | - Total noninterest expense increased by 3.3% for the three months and 0.9% for the six months ended June 30, 2025[182][183] - Salaries, benefits, and commissions increased by $1.3 million (4.5%) for the three months and $837 thousand (1.4%) for the six months, mainly due to higher salaries, medical claims, and variable compensation[184] Tax Provision This section discusses the income tax expense and the effective tax rate for the reporting periods | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Income tax expense | $5,038 | $4,485 | $10,200 | $9,736 | | Effective tax rate | 20.1% | 19.9% | 19.4% | 20.2% | - The effective tax rate for the six months ended June 30, 2025, was 19.4%, favorably impacted by tax-exempt income and BOLI death benefits[12][185] Financial Condition This section provides an analysis of the company's balance sheet, including changes in assets, liabilities, and equity Cash and Interest-Earning Deposits This section details the changes in cash and interest-earning deposit balances and their impact on liquidity | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Cash, interest-earning deposits and federal funds sold | $160,365 | $328,844 | $(168,479) | (51.2%) | - Cash and interest-earning deposits decreased by $168.5 million (51.2%) from December 31, 2024, primarily due to a $174.1 million decrease in interest-earning deposits at the Federal Reserve Bank[187] Investment Securities This section analyzes the company's investment securities portfolio, including purchases, sales, and fair value changes | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Investment securities | $496,677 | $493,978 | $2,699 | 0.5% | - Total investment securities increased by $2.7 million (0.5%), driven by $25.9 million in purchases (primarily residential mortgage-backed securities) and a $10.2 million increase in fair value of available-for-sale securities, partially offset by maturities and sales[188] Loans and Leases This section discusses the trends and composition of the company's loan and lease portfolio | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Loans and leases held for investment | $6,801,185 | $6,826,583 | $(25,398) | (0.4%) | - Gross loans and leases held for investment decreased by $25.4 million (0.4%), mainly due to decreases in commercial real estate, residential mortgage loans, and lease financings, partially offset by increases in commercial, construction, and home equity loans[189] Asset Quality This section evaluates the quality of the company's assets, including nonaccrual loans, charge-offs, and other real estate owned | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Nonaccrual loans and leases held for investment | $27,909 | $12,667 | | Total nonperforming loans and leases | $28,034 | $12,988 | | Total nonperforming assets | $50,585 | $33,205 | | Net loan and lease charge-offs (6 months) | $9,500 | $2,200 | - Nonaccrual loans and leases significantly increased to $27.9 million at June 30, 2025, from $12.7 million at December 31, 2024, primarily due to a $23.7 million commercial loan placed on nonaccrual status[192] - Net loan and lease charge-offs for the six months ended June 30, 2025, were $9.5 million, up from $2.2 million in the prior year, largely due to a $7.3 million charge-off on the aforementioned commercial loan[194] - Other real estate owned (OREO) increased to $22.5 million at June 30, 2025, from $20.1 million at December 31, 2024, including a $2.5 million residential real estate loan transferred to OREO[194] Goodwill and Other Intangible Assets This section provides an update on goodwill and other intangible assets, including any impairment assessments or amortization | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Goodwill and other intangibles, net | $183,477 | $183,819 | $(342) | (0.2%) | - Goodwill remained stable at $175.5 million, with no impairment recognized during the six months ended June 30, 2025[199] - Amortization of core deposit and customer-related intangibles was $261 thousand for the six months ended June 30, 2025[198] Liabilities This section analyzes the overall changes in the company's total liabilities | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Total liabilities | $7,022,323 | $7,241,116 | $(218,793) | (3.0%) | Deposits This section details the changes in deposit balances and their composition, including interest-bearing and noninterest-bearing accounts | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Deposits | $6,582,660 | $6,759,259 | $(176,599) | (2.6%) | | Noninterest bearing deposits (% of total) | 22.2% | 20.9% | 1.3% | 6.2% | | Unprotected deposits (% of total) | 23.0% | 22.0% | 1.0% | 4.5% | - Total deposits decreased by $176.6 million (2.6%), primarily due to decreases in consumer and public funds deposits, partially offset by increases in commercial and brokered deposits[201] Borrowings This section discusses the company's borrowing activities, including short-term and long-term debt and available capacity | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Short-term borrowings | $6,271 | $11,181 | $(4,910) | (43.9%) | | Long-term debt | $200,000 | $225,000 | $(25,000) | (11.1%) | | Total borrowings | $355,782 | $385,442 | $(29,660) | (7.7%) | - Total borrowings decreased by $29.7 million (7.7%), mainly due to $75.0 million in maturities of long-term FHLB advances, partially offset by $50.0 million in new FHLB advances, with these borrowings replaced by brokered deposits[202] Other Liabilities This section provides an overview of changes in other accrued liabilities and their drivers | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Accrued interest payable and other liabilities | $53,775 | $64,930 | $(11,155) | (17.2%) | - Other liabilities decreased by $11.2 million (17.2%), primarily due to a decrease in accrued interest payable on time deposits and payment of previously accrued annual incentive compensation[203] Shareholders' Equity This section analyzes the changes in shareholders' equity, including retained earnings, comprehensive income, and treasury stock | Metric | At June 30, 2025 (Thousands) | At December 31, 2024 (Thousands) | Change Amount | Change Percent | | :----------------------------------- | :----------------------------- | :----------------------------- | :------------ | :------------- | | Total shareholders' equity | $916,733 | $887,301 | $29,432 | 3.3% | | Retained earnings | $555,403 | $525,780 | $29,623 | 5.6% | | Accumulated other comprehensive loss | $(34,969) | $(43,992) | $9,023 | (20.5%) | | Treasury stock | $(63,125) | $(55,100) | $(8,025) | 14.6% | - Total shareholders' equity increased by $29.4 million (3.3%), driven by a $29.6 million increase in retained earnings (net income offset by dividends) and a $9.0 million decrease in accumulated other comprehensive loss (due to fair value increases in available-for-sale securities)[205] - Treasury stock increased by $8.0 million due to repurchases of 394,517 shares for $11.4 million, partially offset by stock issued under various plans[205] Discussion of Segments This section provides a detailed analysis of the financial performance of the company's Banking, Wealth Management, and Insurance segments - The Banking segment's pre-tax income increased for both the three and six months ended June 30, 2025, reflecting improved net interest income[207] - The Wealth Management segment saw significant pre-tax income growth, driven by new customer relationships and appreciation of assets under management and supervision, which reached $5.4 billion[208] - The Insurance segment's pre-tax income decreased, primarily due to a reduction in contingent income[209] Capital Adequacy This section assesses the company's capital ratios against regulatory requirements, confirming its well-capitalized status | Capital Ratio | Corporation (June 30, 2025) | Bank (June 30, 2025) | Required for Capital Adequacy | Required for Well-Capitalized | | :----------------------------------- | :-------------------------- | :------------------- | :---------------------------- | :---------------------------- | | Total Capital (to Risk-Weighted Assets) | 14.58% | 12.36% | 8.00% | 10.00% | | Tier 1 Capital (to Risk-Weighted Assets) | 11.19% | 11.11% | 6.00% | 8.00% | | Tier 1 Common Capital (to Risk-Weighted Assets) | 11.19% | 11.11% | 4.50% | 6.50% | | Tier 1 Capital (to Average Assets) | 9.94% | 9.86% | 4.00% | 5.00% | - Both the Corporation and the Bank exceeded all minimum capital adequacy requirements and were categorized as 'well capitalized' at June 30, 2025[211][213] - The Corporation and Bank maintained capital levels in excess of the capital conservation buffer (2.50% above minimum risk-based requirements)[211] Asset/Liability Management This section describes the strategies and tools used to manage interest rate risk and optimize net interest income - The Corporation uses gap analysis and earnings at risk simulation modeling to quantify interest rate risk exposure and minimize volatility while maximizing net interest income[215] Liquidity This section discusses the company's liquidity position, including available cash, investment securities, and borrowing capacity - The Corporation maintains strong liquidity, with unencumbered cash and cash equivalents of $156.0 million and unencumbered available-for-sale securities of $58.4 million at June 30, 2025[218] - Committed borrowing capacity from the FHLB, Federal Reserve Bank, and a correspondent bank totaled $3.6 billion, with $2.3 billion available at June 30, 2025[218] Sources of Funds This section identifies the primary sources of funding for the company, including deposits and wholesale borrowings - Non-brokered deposits from individuals, businesses, public funds, and non-profit organizations remain the largest funding source[219] - The Corporation also utilizes diversified wholesale funding, including federal funds, FHLB advances, and brokered deposits[220] Cash Requirements This section outlines the company's significant cash obligations and its plans to meet them - Significant cash requirements include repaying certificates of deposit ($1.0 billion due within one year) and short- and long-term borrowings[221] - The Bank plans to meet these obligations through on-balance sheet liquidity, convenient depository services, and utilizing borrowings and brokered deposits[221] Recent Accounting Pronouncements This section refers to the relevant note in the financial statements for details on recent accounting updates - For information regarding recent accounting pronouncements, refer to Note 1 to the Condensed Consolidated Financial Statements, 'Summary of Significant Accounting Policies'[223] Recent Regulatory and Legislative Developments This section discusses the potential impact of recent regulatory and legislative changes on the company's financial statements - The Corporation is evaluating the income tax implications of the 'One Big Beautiful Bill' (the Act), signed on July 4, 2025, but does not currently expect a material impact on its financial statements[224] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there were no material changes in the Corporation's market risk during the period ended June 30, 2025, referring to the Annual Report on Form 10-K for a detailed discussion - No material changes in the Corporation's market risk occurred during the period ended June 30, 2025[225] Item 4. Controls and Procedures This section confirms the effectiveness of the Corporation's disclosure controls and procedures as of June 30, 2025, and reports no material changes in internal control over financial reporting during the quarter - The Corporation's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2025[226] - There were no material changes in internal control over financial reporting during the quarter ended June 30, 2025[227] PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and equity sales Item 1. Legal Proceedings This section reiterates that the Corporation is subject to various legal actions but does not anticipate any material adverse effect on its financial condition or operations - The Corporation does not expect legal proceedings to have a material adverse effect on its results of operations, financial position, or cash flows[228] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the Corporation's Annual Report on Form 10-K - No material changes in risk factors from those disclosed in the 2024 Annual Report on Form 10-K[229] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Corporation's common stock repurchases during the second quarter of 2025 under its Board-approved program, along with information on shares withheld for taxes or exercised via stock options | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------- | :----------------------------- | :--------------------------- | | April 1 – 30, 2025 | 87,598 | $27.31 | | May 1 – 31, 2025 | 51,986 | $30.62 | | June 1 – 30, 2025 | 33,173 | $29.56 | | Total (Q2 2025) | 172,757 | $28.74 | - The Corporation repurchased 172,757 shares of common stock during the second quarter of 2025 under its Board-approved program, at an average price of $28.74 per share[231] - As of June 30, 2025, 1,005,637 shares remained available for repurchase under the existing plans[231] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[236] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Corporation - Mine Safety Disclosures are not applicable to the Corporation[237] Item 5. Other Information This section confirms that no directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the second quarter of 2025 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[238] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and financial statements in Inline XBRL format - Exhibits include Amended and Restated Articles of Incorporation and By-Laws, certifications from the CEO and CFO (302 and 906), and financial statements in Inline XBRL format[241] SIGNATURES This section contains the official signatures of the company's principal executive and financial officers, certifying the report's accuracy - The report was signed on July 29, 2025, by Jeffrey M. Schweitzer, Chairman, President and Chief Executive Officer, and Brian J. Richardson, Senior Executive Vice President and Chief Financial Officer[244]