UNIVEST FINANCIAL Corp: Form 10-Q for the period ended Sep 30, 2025

(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

This report may contain forward-looking statements. When used or incorporated by reference in disclosure documents, the words "may," "will," "could," "should," "would," "believe," "anticipate," "plan," "estimate," "expect," "project," "target," and "goal," the negative of these terms and other similar expressions are intended to identify forward-looking statements, but are not the exclusive mean of identifying such 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 goals, intentions and expectations; statements regarding business plans, prospects, growth and operating strategies; statements regarding the quality, growth and composition of loan, investment and deposit portfolios; statements regarding our financial performance, financial condition and liquidity; and estimates of our risks and future credit provision and non-interest expenses. These forward-looking statements are based on our current beliefs and expectations 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 with respect to future business strategies and decisions that are subject to change, including but not limited to those set forth below:

• Operating, legal and regulatory risks;
• Economic, political and competitive forces;
• General economic conditions, either nationally or in our market areas, that are worse than expected, included as a result of employment levels and labor shortages, and the effect of 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 and changes in the income tax laws and regulations;
• 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;
• The imposition of tariffs or other domestic or international governmental policies and retaliatory responses;
• The impact of the current federal government shutdown;
• Fluctuations in real estate values in our market area;
• A failure to maintain adequate levels of capital and liquidity to support our operations;
• The composition and credit quality of our loan and investment portfolios;
• Changes in the level and direction of loan delinquencies, classified and criticized loans and charge-offs and changes in estimates of the adequacy of the allowance for credit losses;
• Changes in the economic assumptions or methodology 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;
• Changes in investor sentiment or consumer spending or savings behavior;
• Our ability to attract and 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.

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, 2024 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 as of 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, unless otherwise required by law.

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 2024 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 condensed 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 revenues primarily from the margins and fees generated from lending and depository services as well as fee-based income from trust, insurance, mortgage banking, treasury management 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:

(Dollars in thousands, except per share data)

The financial results for the three and nine months ended September 30, 2025 included tax-free bank owned life insurance (BOLI) death benefit claims of $967 thousand and $2.1 million, respectively, which represented $0.03 and $0.07 diluted earnings per share for the respective periods. 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 BOLI death benefit claims of $171 thousand, which represented $0.01 diluted earnings per share for the nine months ended September 30, 2024.

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, 2025 and 2024. 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, 2025 versus 2024

Net interest income on a tax-equivalent basis for the three months ended September 30, 2025 was $61.7 million, an increase of $8.2 million, or 15.4%, compared to $53.5 million for the three months ended September 30, 2024. Net interest income on a tax-equivalent basis for the nine months ended September 30, 2025 was $178.9 million, an increase of $22.3 million, or 14.2%, compared to $156.6 million for the nine months ended September 30, 2024. The increase in tax-equivalent net interest income for the three and nine months ended September 30, 2025 compared to the comparable periods in the prior year was primarily driven by higher average balances on loans and cash and cash equivalents and increased loan yields, as well as a reduction in our overall cost of funds.

The net interest margin, on a tax-equivalent basis, was 3.17% and 3.15% for the three and nine months ended September 30, 2025, respectively, compared to 2.82% and 2.85% for the three and nine months ended September 30, 2024, respectively. Excess liquidity reduced net interest margin by approximately 16 and eight basis points for the three and nine months ended September 30, 2025, respectively, and approximately nine and four basis points for the three and nine months ended September 30, 2024, respectively.

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

(Dollars in thousands)

*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 $687 thousand and $897 thousand for the three months ended September 30, 2025 and 2024, 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, 2025 and 2024 have been calculated using the Corporation's federal applicable rate of 21%.

(Dollars in thousands)

*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 $1.9 million and $2.0 million for the nine months ended September 30, 2025 and 2024, 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, 2025 and 2024 have been calculated using the Corporation's federal applicable rate of 21%.

Table 2—Analysis of Changes in Net Interest Income

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

(Dollars in thousands)

54

Provision for Credit Losses

The provision for credit losses for the three months ended September 30, 2025 and 2024 was $517 thousand and $1.4 million, respectively. The provision for credit losses for the nine months ended September 30, 2025 and 2024 was $8.5 million and $3.6 million, respectively. The increase in provision for the nine months ended September 30, 2025 compared to September 30, 2024 was primarily driven by a $7.3 million charge-off recorded on a $23.7 million commercial loan relationship during the second quarter of 2025. 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)

Noninterest Income

The following table presents noninterest income for the three and nine months ended September 30, 2025 and 2024:

(Dollars in thousands)

Three and nine months ended September 30, 2025 versus 2024

Noninterest income for the three months ended September 30, 2025 was $21.9 million, an increase of $1.8 million, or 8.8%, from the three months ended September 30, 2024. Noninterest income for the nine months ended September 30, 2025 was $65.8 million, a decrease of $886 thousand, or 1.3%, from the nine months ended September 30, 2024.

Bank owned life insurance income increased $987 thousand, or 107.2%, for the three months ended September 30, 2025 and $2.0 million, or 71.3%, for the nine months ended September 30, 2025 from the comparable periods in the prior year, primarily due to death benefit claims received in both periods.

Other service fee income increased $601 thousand, or 33.1%, for the three months ended September 30, 2025 and decreased $3.0 million, or 26.6%, for the nine months ended September 30, 2025 from the comparable periods in the prior year. The three months ended September 30, 2025 included a $306 thousand valuation allowance recorded on mortgage servicing rights compared to a $785 thousand valuation allowance recorded in the third quarter of 2024, each of which were driven by the decrease in interest rates during the respective periods and the impact on prepayments speed assumptions. The decrease for the nine months ended September 30, 2025 was due to a $3.4 million net gain from the sale of mortgage servicing rights associated with $591.1 million of serviced loans in the first quarter of 2024.

Investment advisory commission and fee income increased $352 thousand, or 6.6%, for the three months ended September 30, 2025 and $993 thousand, or 6.3%, for the nine months ended September 30, 2025 from the comparable periods in the prior year, primarily due to new customer relationships and the appreciation of assets under management and supervision.

Service charges on deposit accounts increased $265 thousand, or 13.0%, for the three months ended September 30, 2025 and $864 thousand, or 14.7%, for the nine months ended September 30, 2025 from the comparable periods in the prior year, primarily due to increased treasury management income.

Insurance commission and fee income increased $230 thousand, or 4.4%, for the three months ended September 30, 2025 from the comparable period in the prior year, primarily due to an increase commercial line premiums.

Net gain on mortgage banking activities decreased $448 thousand, or 34.6%, for the three months ended September 30, 2025 and $1.5 million, or 37.2%, for the nine months ended September 30, 2025 from the comparable periods in the prior year, primarily due to decreased salable volume.

Other income decreased $316 thousand, or 22.6%, for the three months ended September 30, 2025 and $605 thousand, or 19.1%, for the nine months ended September 30, 2025 from the comparable periods in the prior year, primarily due to a decrease of $303 thousand in gains on sale of Small Business Administration loans and a decrease of $702 thousand in other real estate owned income, respectively.

Noninterest Expense

The following table presents noninterest expense for the three and nine months ended September 30, 2025 and 2024:

(Dollars in thousands)

Three and nine months ended September 30, 2025 versus 2024

Noninterest expense for the three months ended September 30, 2025 was $50.7 million, an increase of $2.1 million, or 4.4%, from the three months ended September 30, 2024. Noninterest expense for the nine months ended September 30, 2025 was $150.3 million, an increase of $3.0 million, or 2.0%, from the nine months ended September 30, 2024.

Salaries, benefits and commissions increased $950 thousand, or 3.1%, for the three months ended September 30, 2025 and $1.8 million, or 1.9%, for the nine months ended September 30, 2025 from the comparable periods in the prior year, primarily due to annual merit increases and an increase in incentive compensation due to increased profitability, partially offset by an increase in capitalized compensation driven by higher loan production.

Other expense increased $967 thousand, or 14.8%, for the three months ended September 30, 2025 and $1.0 million, or 5.1%, for the nine months ended September 30, 2025 from the comparable periods in the prior year, primarily due to increases in the Pennsylvania bank shares tax expense and loan workout fees, primarily related to one commercial real estate loan relationship.

Professional fees increased $297 thousand, or 18.8%, for the three months ended September 30, 2025 and $537 thousand, or 11.3%, for the nine months ended September 30, 2025 from the comparable periods in the prior year, primarily driven by an increase in consultant fees for data integration resources.

Tax Provision

The Corporation recognized a tax expense of $6.4 million and $4.8 million for the three months ended September 30, 2025 and 2024, respectively, resulting in effective rates of 20.0% and 20.6% for the respective periods. The Corporation recognized a tax expense of $16.6 million and $14.5 million for the nine months ended September 30, 2025 and 2024, respectively, resulting in effective tax rates of 19.6% and 20.3% for the respective periods. The effective tax rates for the three and nine months ended September 30, 2025 and 2024 reflects the benefits of tax-exempt income from investments in municipal securities and loans and leases. Additionally, the effective tax rates for the nine months ended September 30, 2025 and 2024 were favorably impacted from the proceeds of BOLI death benefits. Excluding the impact of BOLI death benefits, the effective tax rates were 20.1% and 20.4% for the nine months ended September 30, 2025 and 2024, respectively.

Financial Condition

Assets

The following table presents assets at the dates indicated:

(Dollars in thousands)

Cash and Interest-Earning Deposits

Cash and interest-earning deposits increased $487.9 million, or 148.4%, from December 31, 2024, primarily due to an increase in interest-earning deposits at the Federal Reserve Bank of $488.2 million driven by increases in customer deposits.

Investment Securities

Total investment securities at September 30, 2025 increased $2.9 million, or 0.6%, from December 31, 2024 as purchases of $42.7 million, which were primarily residential mortgage-backed securities, increases in the fair value of available-for-sale investment securities of $13.8 million and a reversal of provision for credit losses of $821 thousand were partially offset by maturities and pay-downs of $48.3 million, sales of $5.4 million and net amortization of purchased premiums and discounts of $744 thousand.

Loans and Leases

Gross loans and leases held for investment decreased $41.1 million, or 0.6%, from December 31, 2024. The decrease in gross loans and leases held for investment was primarily due to decreases in commercial and residential mortgage loans and lease financings, partially offset by increases in construction, commercial real estate and home equity 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, 2025, nonaccrual loans and leases were $27.3 million and had a related allowance for credit losses on loans and leases of $3.1 million. At December 31, 2024, nonaccrual loans and leases were $12.7 million and had a related allowance for credit losses on loans and leases of $1.9 million. During the second quarter of 2025, a $23.7 million commercial loan relationship was placed on nonaccrual status due to, among other things, suspected fraud. Subsequent to the relationship being placed on nonaccrual status, a $7.3 million charge-off was recognized during the second quarter. During the third quarter of 2025, a $1.4 million residential property associated with this relationship was transferred to other real estate owned. At September 30, 2025, the carrying values of the $13.9 million of loans and $1.4 million other real estate owned asset comprising this relationship are supported by the appraised value of real estate collateral. Individual reserves have been established based on current facts and management's judgments 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 judgments related to these credits.

Net loan and lease charge-offs for the three months ended September 30, 2025 were $480 thousand compared to $820 thousand for the same period in the prior year. Net loan and lease charge-offs for the nine months ended September 30, 2025 were $10.0 million compared to $3.0 million for the same period in the prior year. The increase in charge-offs for the nine months ended September 30, 2025 was related to the charge-off of $7.3 million on the previously discussed commercial loan relationship.

Other real estate owned (OREO) was $23.9 million at September 30, 2025, compared to $20.1 million at December 31, 2024. During the nine months ended September 30, 2025, two nonaccrual residential real estate loans with a total carrying value of $3.9 million were transferred to OREO. Additionally, during the nine months ended September 30, 2025, two residential real estate properties with a total carrying value of $226 thousand were sold. Repossessed assets were $40 thousand and $76 thousand at September 30, 2025 and December 31, 2024, respectively. During the nine months ended September 30, 2025, repossessed assets totaling $78 thousand were acquired and repossessed assets totaling $69 thousand were sold.

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)

59

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, 2025:

(Dollars in thousands)

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 $106 thousand and $175 thousand for the three months ended September 30, 2025 and 2024, respectively. The amortization of core deposit and customer-related intangibles was $367 thousand and $350 thousand for the nine months ended September 30, 2025 and 2024. See Note 5 to the Condensed Unaudited Consolidated Financial Statements, "Goodwill and Other Intangible Assets," for a summary of intangible assets at September 30, 2025 and December 31, 2024.

The Corporation also has goodwill with a net carrying value of $175.5 million at September 30, 2025 and December 31, 2024, 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, 2025 or 2024. There can be no assurance that future impairment assessments or tests will not result in a charge to earnings.

Liabilities

The following table presents liabilities at the dates indicated:

(Dollars in thousands)

Deposits

Total deposits increased $458.9 million, or 6.8%, from December 31, 2024, primarily due to seasonal increases in public funds deposits and increases in commercial and brokered deposits, partially offset by a decrease in consumer deposits. At September 30, 2025, noninterest bearing deposits totaling $1.4 billion represented 19.3% of total deposits compared to $1.4 billion representing 20.9% of total deposits at December 31, 2024. At September 30, 2025 and December 31, 2024, unprotected deposits, which excludes insured, internal, and collateralized deposit accounts, totaled $1.6 billion and $1.5 billion, respectively, which represented 22.0% of total deposits for both periods.

Borrowings

Total borrowings decreased $43.9 million, or 11.4%, from December 31, 2024, primarily due to maturities of long-term FHLB advances totaling $75.0 million, offset by advances of long-term FHLB advances totaling $50.0 million. Additionally, subordinated notes decreased $19.7 million primarily due to a $20.0 million redemption of the previously issued 2020 subordinated notes during the quarter.

Other Liabilities

Other liabilities decreased $13.5 million, or 20.8%, from December 31, 2024, primarily due to a decrease in accrued interest payable on time deposits.

Shareholders’ Equity

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

(Dollars in thousands)

61

Total shareholders' equity increased $45.9 million, or 5.2%, from December 31, 2024. Retained earnings at September 30, 2025 increased by $48.9 million primarily due to net income of $68.0 million offset by $18.8 million in cash dividends paid during the nine months ended September 30, 2025. Accumulated other comprehensive loss decreased by $12.4 million, which was primarily attributable to increases in the fair value of available-for-sale investment securities of $13.8 million, net of tax, due to the lower interest rate environment. Treasury stock increased $15.2 million from December 31, 2024, related to repurchases of 649,527 shares at a cost of $19.2 million, offset by $4.0 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 $32.5 million and $21.6 million for the three months ended September 30, 2025 and 2024, respectively, and pre-tax income of $85.2 million and $70.3 million for the nine months ended September 30, 2025 and 2024, respectively. See the section of this Management's Discussion and Analysis under the headings "Results of Operations" and "Financial Condition" for a discussion of key items impacting the Banking Segment.

The Wealth Management segment reported pre-tax income of $2.1 million and $2.3 million for the three months ended September 30, 2025 and 2024, respectively, which included noninterest income of $8.0 million in 2025 and 2024, and pre-tax income of $5.9 million and $5.1 million for the nine months ended September 30, 2025 and 2024, respectively, which included noninterest income of $23.5 million in 2025 and $22.1 million in 2024. The increase in pre-tax income for the nine months ended September 30, 2025 was primarily due to new customer relationships and the appreciation of assets under management and supervision. Assets under management and supervision were $5.8 billion as of September 30, 2025, $5.4 billion as of June 30, 2025, $5.3 billion as of September 30, 2024 and $5.0 billion as of June 30, 2024.

The Insurance segment reported pre-tax income of $1.1 million for the three months ended September 30, 2025 and 2024, which included noninterest income of $5.5 million in 2025 and $5.2 million in 2024 and pre-tax income of $4.5 million and $5.3 million for the nine months ended September 30, 2025 and 2024, respectively, which included noninterest income of $17.7 million in 2025 and 2024. The increase in noninterest income for the three months ended September 30, 2025 was primarily due to an increase in commercial line premiums. The decrease in pre-tax income for the nine months ended September 30, 2025 was related to increases in noninterest expense, primarily in salaries benefits and commissions, driven by annual merit increases and increased commissions paid to revenue producers.

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, 2025.

Table 5—Regulatory Capital

The Corporation's and Bank's actual and required capital ratios as of September 30, 2025 and December 31, 2024 under regulatory capital rules were as follows.

(Dollars in thousands)

At September 30, 2025 and December 31, 2024, the Corporation and the Bank continued to meet all capital adequacy requirements to which they are subject. At September 30, 2025, the Bank was categorized as "well capitalized" under the regulatory framework for prompt corrective action. There are no conditions or events that management believes have changed the Bank’s category subsequent to September 30, 2025.

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 of 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 incorporate 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 assets, unencumbered cash and cash equivalents, were $811.1 million and $327.8 million at September 30, 2025 and December 31, 2024, respectively. Unencumbered securities classified as available-for-sale, which provide additional sources of liquidity, totaled $32.1 million and $55.4 million at September 30, 2025 and December 31, 2024, respectively. Further, the Corporation and its subsidiaries had committed borrowing capacity from the Federal Home Loan Bank, Federal Reserve Bank and a correspondent bank of $3.6 billion and $3.7 billion at September 30, 2025 and December 31, 2024, respectively, of which $1.8 billion and $2.1 billion was available as of September 30, 2025 and December 31, 2024, respectively. The Corporation and its subsidiaries also maintained uncommitted funding sources from correspondent banks of $457.0 million and $468.0 million at September 30, 2025 and December 31, 2024, respectively. Future availability under these uncommitted funding sources is subject to the prerogatives of the granting banks and may be withdrawn at will.

Sources of Funds

Non-brokered 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. Certificates of deposit due within one year of September 30, 2025 totaled $1.0 billion. If these deposits do not remain with the Bank, the Bank will be required to seek other sources of funds. 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."

Recent Regulatory and Legislative Developments

On July 4, 2025, President Trump signed into law the legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14" and commonly referred to as the One Big Beautiful Bill (the Act). The Corporation is currently evaluating income tax implications of the Act. The Corporation does not currently expect the Act to have a material impact on the Corporation's financial statements.

No material changes in the Corporation’s market risk occurred during the period ended September 30, 2025. 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, 2024.

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, 2025.

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, 2025 that materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

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, 2024.