{"url_path":"/sec/uvsp/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-02-23","source_url":"https://www.sec.gov/Archives/edgar/data/102212/0000102212-26-000012-index.html","accession_number":"0000102212-26-000012","cik":"0000102212","ticker":"UVSP","issuer_name":"UNIVEST FINANCIAL Corp","edgar_url":"https://www.sec.gov/Archives/edgar/data/102212/0000102212-26-000012-index.html","primary_entity_key":"0000102212","primary_entity_name":"UNIVEST FINANCIAL Corp"},"word_count":10190,"has_tables":true,"body_markdown":"Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operations\n\n(All dollar amounts presented in tables are in thousands, except per share data. \"BP\" equates to \"basis points\"; \"N/M\" 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.)\n\nThe information contained in this report may contain forward-looking statements, including statements relating to the Corporation and its financial condition and results of operations that involve certain risks, uncertainties and assumptions. The Corporation's actual results may differ materially from those anticipated, expected or projected as discussed in forward-looking statements. A discussion of forward-looking statements and factors that might cause such a difference includes those discussed in Part I, \"Forward-Looking Statements,\" Item 1A. \"Risk Factors,\" as well as those within this Management's Discussion and Analysis (\"MD&A\") of Financial Condition and Results of Operations and elsewhere in this report.\n\nCritical Accounting Policies\n\nThe discussion below outlines the Corporation's critical accounting policies. For further information regarding accounting policies, refer to Note 1, \"Summary of Significant Accounting Policies\" included in the Notes to the Consolidated Financial Statements under Item 8 of this Form 10-K.\n\nIn 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.\n\nFair Value Measurement of Investment Securities Available-for-Sale: The Corporation designates its investment securities as held-to-maturity, available-for-sale or trading. Each of these designations affords different treatment on the balance sheet and statement of income for market value changes affecting securities. Should evidence emerge that indicates that management's intent or ability to manage the securities as originally asserted is not supportable, securities with the held-to-maturity or available-for-sale designations may be re-categorized, which may result in adjustments to either the balance sheet or statement of income.\n\nFair values for securities are determined using independent pricing services and market-participating brokers. The 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 flows 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.\n\nAllowance for Credit Losses on Loan and Leases: The Allowance for Credit Losses (\"ACL\") on loans and leases uses techniques that estimate losses on pools of loans and leases that share similar risk characteristics and specifically identify losses on individual loans and leases that do not share similar risk characteristics with others. The adequacy of these allowances is sensitive to changes in current and forecasted economic conditions that may affect the ability of borrowers to make contractual payments as well as the value of the collateral securing such payments. Management utilizes a discounted cash flow (\"DCF\") model to calculate the present value of the expected cash flows for pools of loans and leases that share similar risk characteristics and compares the results of this calculation to the amortized cost basis to determine its allowance for credit loss balance. The key assumptions used in the model are (1) probability of default, (2) loss given default, (3) prepayment and curtailment rates, (4) recovery delay (5) reasonable and supportable economic forecasts, (6) forecast reversion period, (7) expected recoveries on charged-off loans, and (8) discount rate. Although management believes it uses the best information available to establish the ACL, future adjustments to the ACL may be necessary and the Corporation’s results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations. While management believes it has established the ACL in conformity with U.S. GAAP, our regulators, in reviewing the loan portfolio, may request us to increase our ACL based on judgments different from ours. In addition, because future events affecting\n\n30\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nborrowers and collateral cannot be predicted without uncertainty, the existing ACL may not be adequate or increases may be necessary should the quality of any loans or leases deteriorate or if there are changes to the assumptions noted above. Any material increase in the ACL would adversely affect the Corporation’s financial condition and results of operations.\n\nThe following table indicates the economic factors utilized in the Corporation's CECL model.\n\nEconomic Factors\n\nAt December 31, 2025At December 31, 2024Description of Economic Factors\n\nPrepayment rates11.27 %11.58 %Average total portfolio rate\n\nCurtailment rates27.93 %28.21 %Average total portfolio rate\n\nRecovery delay30 months31 monthsAverage across all pools\n\nEconomic forecastMoody's downside S2 weighted 42.5%, Baseline weighted 57.5%Moody's downside S2 weighted 60%, Baseline weighted 40%\nMoody's US Macro Forecast Narratives for December 2025 & 2024\n\nUnemployment rates5.48 %5.42 %Average of 4 quarter forecast period\n\nGDP rates1.21 %1.12 %Average of 4 quarter forecast period\n\nHouse price index(1.90)%(1.62)%Average of 4 quarter forecast period\n\nSensitivity Analysis\n\nThe below table indicates the impact to the allowance for credit losses on loans and leases if the factors described below were adjusted in the Corporation's CECL model.\n\nIncrease (Decrease) ($)Adjustment Factor\n\nPrepayment rates+/- 2,000If rates were adjusted across all pools by +/-100 basis points\n\nCurtailment rates+/- 460If rates were adjusted across all pools by +/- 100 basis points\n\nRecovery delay +/- 3,600If recovery delays were adjusted by +/- 3 months across all pools\n\nEconomic forecast(19,000)If Baseline forecasts were used instead of the weighted Downside/Baseline scenarios\n\nEconomic forecast28,100If S2 Downside forecasts were used instead of the weighted Downside/Baseline scenarios\n\nEconomic forecast52,000If S3 Downside forecasts were used instead of the weighted Downside/Baseline scenarios\n\nUnemployment rates20,900If rates were increased across all pools by 100 basis points\n\nUnemployment rates(18,600)If rates were decreased across all pools by 100 basis points\n\nGDP rates +/- 2,200If the GDP forecast inputs were adjusted by +/- 100 basis points\n\nHouse price index +/- 50If the HPI forecast inputs were adjusted by +/- 100 basis points\n\nReversion period650If the reversion period was increased by 2 quarters across all pools\n\nReversion period(775)If the reversion period was decreased by 2 quarters across all pools\n\nReaders of the Corporation’s financial statements should be aware that the estimates and assumptions used in the Corporation’s current financial statements may need to be updated in future financial presentations for changes in circumstances, business or economic conditions in order to fairly represent the condition of the Corporation at that time.\n\nGeneral\n\nThe 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.\n\n31\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nSelected Financial Data\n\nAs of or For the Years Ended December 31,\n\n(Dollars in thousands, except per share data)20252024202320222021\n\nResults of Operations\n\nInterest income$430,486 $412,355 $371,730 $252,193 $209,731 \n\nInterest expense190,291 201,185 151,733 33,896 21,348 \n\nNet interest income240,195 211,170 219,997 218,297 188,383 \n\nProvision (reversal of provision) for credit losses11,667 5,933 10,770 12,198 (10,132)\n\nNet interest income after provision for credit losses 228,528 205,237 209,227 206,099 198,515 \n\nNoninterest income87,861 88,055 76,824 77,885 83,224 \n\nNoninterest expense203,039 197,992 197,362 186,774 167,409 \n\nNet income before income taxes113,350 95,300 88,689 97,210 114,330 \n\nIncome taxes22,593 19,369 17,585 19,090 22,529 \n\nNet income$90,757 $75,931 $71,104 $78,120 $91,801 \n\nFinancial Condition at Year End\n\nCash and cash equivalents$553,712 $328,844 $249,799 $152,799 $890,150 \n\nInvestment securities, net of allowance for credit losses496,289 493,978 500,623 507,562 496,989 \n\nNet loans and leases held for investment6,826,639 6,739,492 6,481,827 6,044,226 5,238,093 \n\nAssets8,436,897 8,128,417 7,780,628 7,222,016 7,122,421 \n\nDeposits7,087,313 6,759,259 6,375,781 5,913,526 6,055,124 \n\nBorrowings323,278 385,442 465,067 440,401 213,980 \n\nShareholders' equity943,318 887,301 839,208 776,500 773,794 \n\nPer Common Share Data\n\nAverage shares outstanding (in thousands)28,735 29,215 29,433 29,393 29,403 \n\nEarnings per share – basic$3.16 $2.60 $2.42 $2.66 $3.12 \n\nEarnings per share – diluted3.13 2.58 2.41 2.64 3.11 \n\nDividends declared per share0.87 0.84 0.84 0.83 0.80 \n\nBook value (at year-end)33.50 30.55 28.44 26.53 26.23 \n\nDividends declared to net income27.6%32.3%34.8%31.2%25.6%\n\nProfitability Ratios\n\nReturn on average assets1.11%0.96%0.94%1.12%1.38%\n\nReturn on average equity9.90 8.85 8.83 10.13 12.50 \n\nAverage equity to average assets11.21 10.86 10.66 11.09 11.04 \n\nEfficiency ratio61.3 65.7 66.0 62.4 60.9 \n\nAsset Quality Ratios\n\nNonaccrual loans and leases to loans and leases held for investment0.20%0.19%0.31%0.22%0.63%\n\nNonperforming loans and leases to loans and leases held for investment (1)0.20 0.19 0.32 0.23 0.63 \n\nNonperforming assets to total assets (1)0.45 0.41 0.52 0.46 0.48 \n\nNet charge-offs to average loans and leases outstanding0.16 0.06 0.08 0.07 — \n\nAllowance for credit losses, loans and leases to total loans and leases held for investment1.28 1.28 1.30 1.29 1.35 \n\nAllowance for credit losses, loans and leases to nonaccrual loans and leases641.53 687.54 415.97 591.66 216.57 \n\nAllowance for credit losses, loans and leases to nonperforming loans and leases (1)637.40 670.55 405.43 555.27 213.37 \n\n(1) The Corporation adopted ASU 2022-02 \"Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures\" effective January 1, 2023, which eliminated the category of troubled debt restructurings. Ratios at December 31, 2022 and 2021 were restated to exclude troubled debt restructured loans from nonperforming loans and nonperforming assets.\n\n32\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nExecutive Overview\n\nThe Corporation's consolidated net income, earnings per share and return on average assets and average equity were as follows:\n\n For the Years Ended December 31,Amount of ChangePercent Change\n\n(Dollars in thousands, except per share data)2025202420232025 to 20242024 to 20232025 to 20242024 to 2023\n\nNet income$90,757 $75,931 $71,104 $14,826 $4,827 19.5 %6.8 %\n\nNet income per share:\n\nBasic$3.16 $2.60 $2.42 $0.56 $0.18 21.5 7.4 \n\nDiluted3.13 2.58 2.41 0.55 0.17 21.3 7.1 \n\nReturn on average assets1.11%0.96%0.94%15 BP2 BP15.6 2.1 \n\nReturn on average equity9.90%8.85%8.83%105 BP2 BP11.9 0.2 \n\n2025 Overview\n\nThe Corporation reported net income of $90.8 million, or $3.13 diluted earnings per share, for 2025 compared to net income of $75.9 million, or $2.58 diluted earnings per share, for 2024.\n\nThe financial results for the year ended December 31, 2025 included bank owned life insurance (\"BOLI\") death benefit claims of $2.1 million, or $0.07 diluted earnings per share.\n\n2024 Overview\n\nThe Corporation reported net income of $75.9 million, or $2.58 diluted earnings per share, for 2024 compared to net income of $71.1 million, or $2.41 diluted earnings per share, for 2023.\n\nThe financial results for the year ended December 31, 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. Additionally, the financial results for the year ended December 31, 2024 included bank owned life insurance (\"BOLI\") death benefit claims of $241 thousand, or $0.01 diluted earnings per share.\n\nResults of Operations\n\nNet Interest Income\n\nNet 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 years ended December 31, 2025, 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.\n\n2025 versus 2024\n\nReported net interest income for the year ended December 31, 2025 was $240.2 million, an increase of $29.0 million, or 13.7%, from the prior year. Net interest income, on a tax-equivalent basis, for the year ended December 31, 2025 was $241.9 million, an increase of $29.5 million, or 13.9%, from the prior year. An increase in tax-equivalent interest income of $18.6 million was driven by increased loan yields, and increases in the average balance of average interest-earning assets, as well as a decrease of $10.9 million in interest expense, which was largely driven by a decrease in the cost of interest-bearing deposits and a decrease in the average balance of borrowings. This was offset by an increase in the average balance of deposits. The net interest margin on a tax-equivalent basis for the year ended December 31, 2025 was 3.14% compared to 2.86% for 2024.\n\n33\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\n2024 versus 2023\n\nReported net interest income for the year ended December 31, 2024 was $211.2 million, a decrease of $8.8 million, or 4.0%, from the prior year. Net interest income, on a tax-equivalent basis, for the year ended December 31, 2024 was $212.3 million, a decrease of $8.9 million, or 4.0%, from the prior year. An increase in tax-equivalent interest income of $40.6 million, driven by increases in asset yields, including loan and investment yields, and increases in the average balance of average interest-earning assets was outpaced by an increase in interest expense of $49.5 million, which was largely driven by an increase in the cost of, and the average balances of, interest-bearing deposits. The net interest margin on a tax-equivalent basis for the year ended December 31, 2024 was 2.86% compared to 3.12% for 2023. The net interest margin decrease was attributable to the increase in interest rates and the liability sensitivity of the Corporation's balance sheet.\n\n34\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nTable 1—Average Balances and Interest Rates—Tax-Equivalent Basis\n\n For the Years Ended December 31,\n\n 202520242023\n\n(Dollars in thousands)Average\nBalanceIncome/\nExpenseAverage\nRateAverage\nBalanceIncome/\nExpenseAverage\nRateAverage\nBalanceIncome/\nExpenseAverage\nRate\n\nAssets:\n\nInterest-earning deposits with other banks$333,556 $13,902 4.17%$220,356 $11,193 5.08%$130,309 $6,660 5.11%\n\nObligations of states and political\nsubdivisions*217 4 1.84 1,447 33 2.28 2,282 62 2.72 \n\nOther debt and equity securities496,435 15,925 3.21 495,604 14,909 3.01 505,343 14,225 2.81 \n\nFederal Home Loan Bank, Federal Reserve Bank and other stock37,584 2,848 7.58 38,647 2,912 7.53 40,092 2,869 7.16 \n\nTotal interest-earning deposits, investments and other interest-earning assets867,792 32,679 3.77 756,054 29,047 3.84 678,026 23,816 3.51 \n\nCommercial, financial and agricultural loans971,245 67,829 6.98 972,213 69,921 7.19 991,505 67,487 6.81 \n\nReal estate—commercial and construction loans3,720,892 218,473 5.87 3,587,147 207,053 5.77 3,483,576 188,644 5.42 \n\nReal estate—residential loans1,723,191 87,127 5.06 1,670,126 82,344 4.93 1,505,799 70,349 4.67 \n\nLoans to individuals15,360 1,335 8.69 26,646 2,161 8.11 27,063 2,011 7.43 \n\nTax-exempt loans and leases228,478 11,951 5.23 232,020 10,157 4.38 232,501 9,597 4.13 \n\nLease financings176,420 12,749 7.23 189,054 12,845 6.79 178,220 11,025 6.19 \n\nGross loans and leases6,835,586 399,464 5.84 6,677,206 384,481 5.76 6,418,664 349,113 5.44 \n\nTotal interest-earning assets7,703,378 432,143 5.61 7,433,260 413,528 5.56 7,096,690 372,929 5.25 \n\nCash and due from banks57,252 57,799 58,593 \n\nAllowance for credit losses, loans and leases(87,942)(86,530)(82,474)\n\nPremises and equipment, net46,797 48,610 51,921 \n\nOperating lease right-of-use asset26,936 29,990 31,351 \n\nOther assets425,134 414,578 400,977 \n\nTotal assets$8,171,555 $7,897,707 $7,557,058 \n\nLiabilities:\n\nInterest-bearing checking deposits$1,281,075 $32,735 2.56%$1,191,634 $32,857 2.76%$1,034,327 $23,668 2.29%\n\nMoney market savings1,920,600 73,424 3.82 1,801,035 80,217 4.45 1,611,169 64,153 3.98 \n\nRegular savings720,718 4,024 0.56 740,493 3,529 0.48 871,332 3,249 0.37 \n\nTime deposits1,485,281 61,838 4.16 1,413,589 64,266 4.55 931,944 34,979 3.75 \n\nTotal time and interest-bearing deposits5,407,674 172,021 3.18 5,146,751 180,869 3.51 4,448,772 126,049 2.83 \n\nShort-term borrowings11,112 19 0.17 13,703 249 1.82 148,776 7,095 4.77 \n\nLong-term debt204,452 8,778 4.29 253,733 10,942 4.31 263,877 9,464 3.59 \n\nSubordinated notes139,584 9,473 6.79 149,007 9,125 6.12 148,507 9,125 6.14 \n\nTotal borrowings355,148 18,270 5.14 416,443 20,316 4.88 561,160 25,684 4.58 \n\nTotal interest-bearing liabilities5,762,822 190,291 3.30 5,563,194 201,185 3.62 5,009,932 151,733 3.03 \n\nNoninterest-bearing deposits1,406,985 1,380,178 1,646,286 \n\nOperating lease liabilities29,765 33,006 34,474 \n\nAccrued expenses and other liabilities55,550 63,310 60,699 \n\nTotal liabilities7,255,122 7,039,688 6,751,391 \n\nTotal interest-bearing liabilities and noninterest-bearing deposits (\"Cost of Funds\")7,169,807 2.65 6,943,372 2.90 6,656,218 2.28 \n\nShareholders' Equity:\n\nCommon stock157,784 157,784 157,784 \n\nAdditional paid-in capital302,243 300,644 299,804 \n\nRetained earnings and other equity456,406 399,591 348,079 \n\nTotal shareholders' equity916,433 858,019 805,667 \n\nTotal liabilities and shareholders' equity$8,171,555 $7,897,707 $7,557,058 \n\nNet interest income$241,852 $212,343 $221,196 \n\nNet interest spread2.31 1.94 2.22 \n\nEffect of net interest-free funding sources0.83 0.92 0.90 \n\nNet interest margin3.14%2.86%3.12%\n\nRatio of average interest-earning assets to average interest-bearing liabilities133.67%133.61%141.65%\n\n*Obligations of states and political subdivisions are tax-exempt earning assets.\n\nNotes: For rate calculation purposes, average loan and lease categories include deferred fees and costs and purchase accounting adjustments.\n\nNet interest income includes net deferred costs amortization of $2.5 million, $2.7 million and $2.1 million for the years ended December 31, 2025, 2024 and 2023, respectively.\n\nNonaccrual 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.\n\nTax-equivalent amounts for the years ended December 31, 2025, 2024 and 2023 have been calculated using the Corporation's federal applicable rate of 21%.\n\n35\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nTable 2—Analysis of Changes in Net Interest Income\n\nThe rate-volume variance analysis set forth in the table below compares changes in tax-equivalent net interest income for the year ended December 31, 2025 compared to 2024 and for the year ended December 31, 2024 compared to 2023, indicated by their rate and volume components. The change in interest income/expense due to both volume and rate has been allocated proportionately.\n\n For the Years Ended December 31, 2025 Versus 2024For the Years Ended December 31, 2024 Versus 2023\n\n(Dollars in thousands)Volume\nChangeRate\nChangeTotalVolume\nChangeRate\nChangeTotal\n\nInterest income:\n\nInterest-earning deposits with other banks$4,982 $(2,273)$2,709 $4,572 $(39)$4,533 \n\nObligations of states and political subdivisions(24)(5)(29)(20)(9)(29)\n\nOther debt and equity securities25 991 1,016 (285)969 684 \n\nFederal Home Loan Bank, Federal Reserve Bank and other stock(82)18 (64)(104)147 43 \n\nInterest on deposits, investments and other interest-earning assets4,901 (1,269)3,632 4,163 1,068 5,231 \n\nCommercial, financial and agricultural loans(69)(2,023)(2,092)(1,319)3,753 2,434 \n\nReal estate—commercial and construction loans7,796 3,624 11,420 5,804 12,605 18,409 \n\nReal estate—residential loans2,614 2,169 4,783 7,943 4,052 11,995 \n\nLoans to individuals(971)145 (826)(31)181 150 \n\nTax-exempt loans and leases(157)1,951 1,794 (20)580 560 \n\nLease financings(894)798 (96)702 1,118 1,820 \n\nInterest and fees on loans and leases8,319 6,664 14,983 13,079 22,289 35,368 \n\nTotal interest income13,220 5,395 18,615 17,242 23,357 40,599 \n\nInterest expense:\n\nInterest-bearing checking deposits2,363 (2,485)(122)3,911 5,278 9,189 \n\nMoney market savings5,076 (11,869)(6,793)8,024 8,040 16,064 \n\nRegular savings(95)590 495 (549)829 280 \n\nTime deposits3,196 (5,624)(2,428)20,730 8,557 29,287 \n\nTotal time and interest-bearing deposits10,540 (19,388)(8,848)32,116 22,704 54,820 \n\nShort-term borrowings(40)(190)(230)(4,072)(2,774)(6,846)\n\nLong-term debt(2,113)(51)(2,164)(373)1,851 1,478 \n\nSubordinated notes(604)952 348 — — — \n\nInterest on borrowings(2,757)711 (2,046)(4,445)(923)(5,368)\n\nTotal interest expense7,783 (18,677)(10,894)27,671 21,781 49,452 \n\nNet interest income$5,437 $24,072 $29,509 $(10,429)$1,576 $(8,853)\n\n36\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nProvision for Credit Losses\n\nThe provision for credit losses for the years ended December 31, 2025, 2024 and 2023 was $11.7 million, $5.9 million and $10.8 million, respectively. Net loan and lease charge-offs for the years ended December 31, 2025, 2024, and 2023 were $11.1 million, $3.8 million and $5.4 million, respectively. The year ended December 31, 2025 included a $6.8 million net charge-off recorded on a $23.7 million commercial loan relationship. The year ended December 31, 2023 included $2.4 million in charge-offs related to two nonaccrual commercial loans to one borrower. 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.\n\nAt December 31,\n\n(Dollars in thousands)202520242023\n\nAllowance for credit losses, loans and leases$88,165 $87,091 $85,387 \n\nLoans and leases held for investment6,914,804 6,826,583 6,567,214 \n\nAllowance for credit losses, loans and leases / loans and leases held for investment1.28 %1.28 %1.30 %\n\nNoninterest Income\n\nThe following table presents noninterest income for the years ended December 31, 2025, 2024 and 2023:\n\n For the Years Ended December 31,$ Change% Change\n\n(Dollars in thousands)2025202420232025 to 20242024 to 20232025 to 20242024 to 2023\n\nTrust fee income$8,853 $8,491 $7,732 $362 $759 4.3 %9.8 %\n\nService charges on deposit accounts8,991 8,082 7,048 909 1,034 11.2 14.7 \n\nInvestment advisory commission and fee income22,799 21,208 18,864 1,591 2,344 7.5 12.4 \n\nInsurance commission and fee income22,443 22,349 21,043 94 1,306 0.4 6.2 \n\nOther service fee income10,938 14,747 12,381 (3,809)2,366 (25.8)19.1 \n\nBank owned life insurance income5,849 3,861 3,185 1,988 676 51.5 21.2 \n\nNet gain on sales of investment securities— 18 — (18)18 N/MN/M\n\nNet gain on mortgage banking activities3,362 5,265 3,689 (1,903)1,576 (36.1)42.7 \n\nOther income4,626 4,034 2,882 592 1,152 14.7 40.0 \n\nTotal noninterest income$87,861 $88,055 $76,824 $(194)$11,231 (0.2)%14.6 %\n\n2025 versus 2024\n\nNoninterest income for the year ended December 31, 2025 was $87.9 million, a decrease of $194 thousand, or 0.2%, compared to 2024.\n\nOther service fee income decreased $3.8 million, or 25.8%, for the year ended December 31, 2025, primarily due to the net gain of $3.4 million generated from the sale of mortgage servicing rights associated with $591.1 million of serviced loans in the first quarter of 2024. Net gain on mortgage banking activities decreased $1.9 million, or 36.1%, for the year ended December 31, 2025, primarily due to decreased salable volume and lower margins.\n\nBOLI income increased $2.0 million, or 51.5%, for the year ended December 31, 2025, primarily due to death benefit claims of $2.1 million received during the year. Investment advisory commission and fee income increased $1.6 million, or 7.5%, for the year ended December 31, 2025, primarily due to increased assets under management and supervision driven by market appreciation. Service charges on deposit accounts increased $909 thousand, or 11.2%, for the year ended December 31, 2025, primarily due to an increase of $976 thousand in treasury management fees. Other income increased $592 thousand, or 14.7%, for the year ended December 31, 2025, primarily driven by a $620 thousand increase in fees on risk participation agreements for interest rate swaps due to increased demand.\n\n37\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\n2024 versus 2023\n\nNoninterest income for the year ended December 31, 2024 was $88.1 million, an increase of $11.2 million, or 14.6%, compared to 2023.\n\nOther service fee income increased $2.4 million, or 19.1%, for the year ended December 31, 2024, primarily due to the net gain of $3.4 million generated from the sale of mortgage servicing rights associated with $591.1 million of serviced loans in the first quarter of 2024, partially offset by a $966 thousand decrease in servicing fees associated with these loans. Investment advisory commission and fee income increased $2.3 million, or 12.4%, for the year ended December 31, 2024, primarily due to increased assets under management and supervision driven by new business and market appreciation. Net gain on mortgage banking activities increased $1.6 million, or 42.7%, for the year ended December 31, 2024, primarily due to increased salable volume and favorable margins. Insurance commission and fee income increased $1.3 million, or 6.2%, for the year ended December 31, 2024, primarily due to increases of $1.0 million in premiums for commercial lines and $435 thousand in contingent commission income. Service charges on deposit accounts increased $1.0 million, or 14.7%, for the year ended December 31, 2024, primarily due to an increase of $950 thousand in treasury management fees.\n\nOther income increased $1.2 million, or 40.0%, for the year ended December 31, 2024. Gains on the sale of Small Business Administration loans increased $1.9 million due to increased sale volume, partially offset by a $605 thousand decrease in interest rate swap income due to decreased demand.\n\nNoninterest Expense\n\nThe following table presents noninterest expense for the years ended December 31, 2025, 2024 and 2023:\n\n For the Years Ended December 31,$ Change% Change\n\n(Dollars in thousands)2025202420222025 to 20242024 to 20232025 to 20242024 to 2023\n\nSalaries, benefits and commissions$127,023 $123,745 $120,188 $3,278 $3,557 2.6 %3.0 %\n\nNet occupancy11,149 11,025 10,686 124 339 1.1 3.2 \n\nEquipment4,293 4,453 4,132 (160)321 (3.6)7.8 \n\nData processing17,425 16,956 16,799 469 157 2.8 0.9 \n\nProfessional fees7,217 6,402 7,141 815 (739)12.7 (10.3)\n\nMarketing and advertising1,653 2,173 2,180 (520)(7)(23.9)(0.3)\n\nDeposit insurance premiums4,526 4,432 4,825 94 (393)2.1 (8.1)\n\nIntangible expenses469 694 938 (225)(244)(32.4)(26.0)\n\nRestructuring charges— — 1,519 — (1,519)N/MN/M\n\nOther expense29,284 28,112 28,954 1,172 (842)4.2 (2.9)\n\nTotal noninterest expense$203,039 $197,992 $197,362 $5,047 $630 2.5 %0.3 %\n\n2025 versus 2024\n\nNoninterest expense for the year ended December 31, 2025 was $203.0 million, an increase of $5.0 million, or 2.5%, compared to 2024.\n\nSalaries, benefits and commissions increased $3.3 million, or 2.6%, for the year ended December 31, 2025, 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 $1.2 million, or 4.2%, for the year ended December 31, 2025, primarily driven by a $1.5 million increase in loan workout fees, partially offset by decrease in retirement plan costs of $463 thousand. Professional fees increased $815 thousand, or 12.7%, for the year ended December 31, 2025, due to increases of $563 thousand of consulting fees for data integration resources and $156 thousand for legal fees.\n\n2024 versus 2023\n\nNoninterest expense for the year ended December 31, 2024 was $198.0 million, an increase of $630 thousand, or 0.3%, compared to 2023.\n\n38\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nSalaries, benefits and commissions increased $3.6 million, or 3.0%, for the year ended December 31, 2024, primarily due to an increase in incentive compensation due to increased profitability in the current year.\n\nProfessional fees decreased $739 thousand, or 10.3%, for the year ended December 31, 2024, primarily due to a decrease of $1.0 million of consulting fees due to the costs of implementing our digital initiative in the prior year. Other expense decreased $842 thousand, or 2.9%, primarily driven by decreases in retirement plan costs of $857 thousand. Additionally, the year ended December 31, 2023 included $1.5 million in restructuring charges associated with the Corporation's financial service center optimization and expense management strategies deployed in response to macroeconomic headwinds.\n\nTax Provision\n\nThe provision for income taxes was $22.6 million, $19.4 million and $17.6 million for the years ended December 31, 2025, 2024 and 2023, respectively, at effective rates of 19.9%, 20.3% and 19.8%, respectively. The effective tax rates reflected the benefits of tax-exempt income from investments in municipal securities and loans and leases. Excluding this impact, the effective tax rates were 21.7%, 22.1% and 21.7% for the years ended December 31, 2025, 2024 and 2023, respectively. The decrease in the effective tax rate for 2025 compared to 2024 was primarily due to the favorable impact from the proceeds of BOLI death benefits. The increase in the effective tax rate for 2024 compared to 2023 was primarily due to increases in state tax rates and the impact of stock-based compensation during the year.\n\nFinancial Condition\n\nASSETS\n\nThe following table presents assets at the dates indicated:\n\nAt December 31,\n\n(Dollars in thousands)20252024$ Change% Change\n\nCash and cash equivalents$553,712 $328,844 $224,868 68.4 %\n\nInvestment securities, net of allowance for credit losses 496,289 493,978 2,311 0.5 \n\nFederal Home Loan Bank, Federal Reserve Bank and other stock, at cost37,808 38,980 (1,172)(3.0)\n\nLoans held for sale15,288 16,653 (1,365)(8.2)\n\nLoans and leases held for investment6,914,804 6,826,583 88,221 1.3 \n\nAllowance for credit losses, loans and leases(88,165)(87,091)(1,074)1.2 \n\nPremises and equipment, net45,554 46,671 (1,117)(2.4)\n\nOperating lease right-of-use asset25,795 28,531 (2,736)(9.6)\n\nGoodwill and other intangibles, net182,838 183,819 (981)(0.5)\n\nBank owned life insurance140,001 139,351 650 0.5 \n\nAccrued interest receivable and other assets112,973 112,098 875 0.8 \n\nTotal assets$8,436,897 $8,128,417 $308,480 3.8 %\n\nCash and Interest-Earning Deposits\n\nCash and interest-earning deposits increased $224.9 million, or 68.4%, from December 31, 2024, primarily due to increased interest-earning deposits at the Federal Reserve Bank of $231.7 million due to increases in deposits outpacing loan growth, partially offset by the repayment of subordinated notes and long-term debt.\n\nInvestment Securities\n\nTotal investment securities at December 31, 2025 increased $2.3 million, or 0.5%, from December 31, 2024. Purchases of $60.3 million, which were primarily residential mortgage-backed securities, increases in the fair value of available-for-sale investment securities of $17.2 million and a reversal of provision for credit losses of $828 thousand were partially offset by maturities and pay-downs of $68.1 million, sales of $6.9 million and net amortization of purchased premiums and discounts of $1.0 million.\n\n39\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nTable 3—Investment Securities\n\nThe following table shows the carrying amount of investment securities, net of allowance for credit losses, at the dates indicated. Held-to-maturity, available-for-sale and equity security portfolios are combined.\n\nAt December 31,\n\n(Dollars in thousands)202520242023\n\nState and political subdivisions$— $1,295 $2,301 \n\nResidential mortgage-backed securities412,604 417,492 410,329 \n\nCollateralized mortgage obligations1,368 1,685 2,001 \n\nCorporate bonds80,303 71,000 82,699 \n\nEquity securities2,014 2,506 3,293 \n\nTotal investment securities$496,289 $493,978 $500,623 \n\nTable 4—Investment Securities (Yields)\n\nThe following table shows the maturity distribution and weighted average yields of investment securities at amortized cost at December 31, 2025. Expected maturities may differ from contractual maturities because debt issuers may have the right to call or prepay obligations without call or prepayment penalties. Therefore, the stated yield may not be recognized in future periods. Additionally, residential mortgage-backed securities, which are collateralized by residential mortgage loans, typically prepay at a rate faster than the stated maturity. The weighted average yield is calculated by dividing income, which has not been tax effected on tax-exempt obligations, within each contractual maturity range by the outstanding amount of the related investment. Held-to-maturity and available-for-sale portfolios are combined, net of allowance for credit losses.\n\n1 Year or lessAfter 1 Year to 5 YearsAfter 5 Years to 10 YearsAfter 10 Years\n\n(Dollars in thousands)Amortized CostWeighted Average YieldAmortized CostWeighted Average YieldAmortized CostWeighted Average YieldAmortized CostWeighted Average Yield\n\nResidential mortgage-backed securities$— — %$644 2.44 %$24,543 2.43 %$412,023 2.95 %\n\nCollateralized mortgage obligations— — 71 2.44 — — 1,371 1.57 \n\nCorporate bonds7,482 2.09 75,366 4.09 — — — — \n\nTotal held-to- maturity and available-for-sale investment securities$7,482 2.09 %$76,081 4.08 %$24,543 2.43 %$413,394 2.95 %\n\nAt December 31, 2025, the Corporation had no reportable investments in any single issuer representing more than 10% of shareholders' equity.\n\nLoans and Leases\n\nGross loans and leases held for investment at December 31, 2025 increased $88.2 million, or 1.3%, from December 31, 2024. The growth in gross loans and leases held for investment was primarily due to increases in construction, commercial real estate and home equity loans, partially offset by decreases in commercial and residential mortgage loans and lease financings.\n\n40\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nTable 5—Loan and Lease Maturities and Sensitivity to Changes in Interest Rates\n\nThe following table presents the maturity schedule of the loan and lease portfolio at December 31, 2025. Loans with variable rates or floating interest rates include adjustable rate instruments that may have longer than one month, and in some instances, multiple years of a fixed rate interest period.\n\n(Dollars in thousands)TotalDue in One Year or LessDue after One Year to Five YearsDue After Five Years to Fifteen YearsDue After Fifteen Years\n\nLoans and leases with fixed predetermined interest rates:\n\nCommercial, financial and agricultural$195,444 $15,112 $151,804 $17,909 $10,619 \n\nReal estate-commercial1,371,487 264,694 1,048,537 47,646 10,610 \n\nReal estate-construction37,978 15,666 15,226 4,267 2,819 \n\nReal estate-residential secured for business purpose183,286 37,268 139,334 6,684 — \n\nReal estate-residential secured for personal purpose56,413 2,060 9,908 12,874 31,571 \n\nReal estate-home equity secured for personal purpose5,877 746 765 4,366 — \n\nLoans to individuals9,898 5,932 3,558 217 191 \n\nLease financings232,066 9,338 209,181 13,547 — \n\nLoans and leases with fixed predetermined interest rates$2,092,449 $350,816 $1,578,313 $107,510 $55,810 \n\nLoans and leases with variable or floating interest rates:\n\nCommercial, financial and agricultural$831,990 $725,458 $79,373 $27,159 $— \n\nReal estate-commercial2,250,049 1,355,076 891,932 3,041 — \n\nReal estate-construction268,815 174,455 59,557 34,803 — \n\nReal estate-residential secured for business purpose370,892 108,820 261,821 251 — \n\nReal estate-residential secured for personal purpose903,197 27,872 200,239 675,086 — \n\nReal estate-home equity secured for personal purpose194,517 193,821 696 — — \n\nLoans to individuals2,895 2,789 6 84 16 \n\nLoans with variable or floating interest rates$4,822,355 $2,588,291 $1,493,624 $740,424 $16 \n\nTotal gross loans and leases held for investment$6,914,804 $2,939,107 $3,071,937 $847,934 $55,826 \n\nAsset Quality\n\nThe 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.\n\nNonaccrual 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.\n\nAt December 31, 2025, nonaccrual loans and leases were $13.7 million and had a related allowance for credit losses on loans and leases of $3.0 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. During the fourth quarter, loans totaling $13.9 million associated with this relationship were paid off and a $449 thousand recovery was recognized. As of December 31, 2025, the $1.4 million residential property remains in other real estate owned and the carrying value of the asset is 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.\n\n41\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nNet loan and lease charge-offs for the year ended December 31, 2025 were $11.1 million compared to net loan and lease charge-offs of $3.8 million for the year ended December 31, 2024. Net charge-offs for the year ended December 31, 2025 included a $6.8 million net charge-off recorded on a $23.7 million commercial loan relationship.\n\nOther real estate owned was $23.9 million at December 31, 2025, compared to $20.1 million at December 31, 2024. During the year ended December 31, 2025, two nonaccrual residential real estate loans with a total carrying value of $3.9 million were transferred to OREO. Additionally, during the year ended December 31, 2025, two residential real estate properties with a total carrying value of $226 thousand were sold. Additionally, write-downs on repossessed assets totaled $44 thousand during the year. Repossessed assets were $65 thousand at December 31, 2025, compared to $76 thousand at December 31, 2024. During the year ended December 31, 2025, repossessed assets totaling $143 thousand were acquired and repossessed assets totaling $105 thousand were sold.\n\nTable 6—Nonaccrual and Past Due Loans and Leases; Other Real Estate Owned; Repossessed Assets; and Related Ratios\n\nThe following table details information pertaining to the Corporation's nonperforming assets at the dates indicated.\n\nAt December 31,\n\n(Dollars in thousands)202520242023\n\nNonaccrual loans held for sale$— $— $8 \n\nNonaccrual loans and leases held for investment13,743 12,667 20,519 \n\nAccruing loans and leases, 90 days or more past due89 321 534 \n\nTotal nonperforming loans and leases$13,832 $12,988 $21,061 \n\nOther real estate owned23,926 20,141 19,032 \n\nRepossessed assets65 76 — \n\nTotal nonperforming assets$37,823 $33,205 $40,093 \n\nLoans and leases held for investment$6,914,804 $6,826,583 $6,567,214 \n\nAllowance for credit losses, loans and leases88,165 87,091 85,387 \n\nNonaccrual loans and leases with partial charge-offs1,532 273 814 \n\nReserves on individually analyzed loans3,022 1,945 1,787 \n\nAllowance for credit losses, loans and leases / loans and leases held for investment1.28%1.28%1.30%\n\nNonaccrual loans and leases / loans and leases held for investment0.20%0.19%0.31%\n\nAllowance for credit losses, loans and leases / nonaccrual loans and leases641.53%687.54%415.97%\n\n42\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nTable 7—Loan Portfolio Overview\n\nThe following table provides summarized detail related to outstanding commercial loan balances segmented by industry description as of December 31, 2025:\n\n(Dollars in thousands)December 31, 2025\n\nIndustry DescriptionTotal Outstanding Balance% of Commercial Loan Portfolio\n\nCRE - Retail$437,864 7.9 %\n\nAnimal Production428,809 7.8 \n\nCRE - Multi-family383,688 7.0 \n\nCRE - 1-4 Family Residential Investment277,643 5.0 \n\nHotels & Motels (Accommodation)259,170 4.7 \n\nCRE - Office244,534 4.4 \n\nCRE - Industrial / Warehouse222,619 4.0 \n\nSpecialty Trade Contractors209,450 3.8 \n\nNursing and Residential Care Facilities163,938 3.0 \n\nHomebuilding (tract developers, remodelers)150,906 2.7 \n\nMerchant Wholesalers, Durable Goods137,124 2.5 \n\nCrop Production135,818 2.5 \n\nRepair and Maintenance124,570 2.3 \n\nMotor Vehicle and Parts Dealers116,657 2.1 \n\nCRE - Mixed-Use - Commercial114,659 2.1 \n\nCRE - Mixed-Use - Residential108,517 2.0 \n\nAdministrative and Support Services99,083 1.8 \n\nWood Product Manufacturing98,771 1.8 \n\nReal Estate Lenders, Secondary Market Financing93,066 1.7 \n\nProfessional, Scientific, and Technical Services92,883 1.7 \n\nFood Services and Drinking Places90,211 1.6 \n\nFabricated Metal Product Manufacturing79,947 1.5 \n\nMerchant Wholesalers, Nondurable Goods79,922 1.5 \n\nEducation78,031 1.4 \n\nAmusement, Gambling, and Recreation Industries76,874 1.4 \n\nReligious Organizations, Advocacy Groups65,397 1.2 \n\nMiniwarehouse / Self-Storage63,371 1.2 \n\nPersonal and Laundry Services62,052 1.1 \n\nFood Manufacturing59,804 1.1 \n\nMachinery Manufacturing52,598 1.0 \n\nIndustries with >$50 million in outstandings$4,607,976 83.6 %\n\nIndustries with <$50 million in outstandings$901,965 16.4 %\n\nTotal Commercial Loans$5,509,941 100.0 %\n\nConsumer Loans and Lease FinancingsTotal Outstanding Balance\n\nReal Estate-Residential Secured for Personal Purpose$959,610 \n\nReal Estate-Home Equity Secured for Personal Purpose200,394 \n\nLoans to Individuals12,793 \n\nLease Financings232,066 \n\nTotal Consumer Loans and Lease Financings$1,404,863 \n\nTotal$6,914,804 \n\n43\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nTable 8—Summary of Loan and Lease Loss Experience\n\nThe following table presents average loans and leases and loan and lease loss experience for the periods indicated.\n\n For the Years Ended December 31,\n\n202520242023\n\n(Dollars in thousands)Average LoansNet Charge-offs (Recoveries)Net Charge-offs (Recoveries) to Average LoansAverage LoansNet Charge-offs (Recoveries)Net Charge-offs (Recoveries) to Average LoansAverage LoansNet Charge-offs (Recoveries)Net Charge-offs (Recoveries) to Average Loans\n\nCommercial, financial and agricultural$1,041,998 $8,444 0.81 %$1,035,684 $2,329 0.22 %$1,056,025 $4,510 0.43 %\n\nReal estate-commercial3,520,879 1,147 0.03 3,367,837 21 — 3,182,965 37 — \n\nReal estate-construction300,136 — — 329,218 500 0.15 414,567 206 0.05 \n\nReal estate-residential secured for business purpose539,146 — — 528,631 (235)(0.04)505,240 (135)(0.03)\n\nReal estate-residential secured for personal purpose990,788 35 — 960,915 (134)(0.01)826,943 — — \n\nReal estate-home equity secured for personal purpose193,257 (2)— 180,579 (46)(0.03)175,395 2 — \n\nLoans to individuals15,360 675 4.39 26,645 828 3.11 27,063 426 1.57 \n\nLease financings234,022 819 0.35 247,697 539 0.22 230,466 351 0.15 \n\nTotal$6,835,586 $11,118 0.16 %$6,677,206 $3,802 0.06 %$6,418,664 $5,397 0.08 %\n\nDuring the year ended December 31, 2025, the Corporation recorded charge-offs of $7.3 million related to a $23.7 million commercial loan relationship. During the year ended December 31, 2024, the Corporation recorded charge-offs of $900 thousand related to five commercial loan relationships. During the year ended December 31, 2023, the Corporation recorded charge-offs of $2.4 million related to two nonaccrual commercial loans to one borrower totaling $5.9 million.\n\nTable 9—Allowance for Credit Losses On Loans and Leases\n\nThe following table summarizes the allocation of the allowance for credit losses on loans and leases, and the percentage of loans and leases in each major loan category to total loans and leases held for investment at the dates indicated.\n\nAt December 31,\n\n20252024\n\n(Dollars in thousands)ACL% of ACL to Total ACL% of Loans to Total LoansACL% of ACL to Total ACL% of Loans to Total Loans\n\nCommercial, financial and agricultural$16,983 19.3 %14.9 %$16,079 18.5 %15.2 %\n\nReal estate-commercial47,166 53.5 52.4 46,867 53.8 51.7 \n\nReal estate-construction5,475 6.2 4.4 4,924 5.7 4.0 \n\nReal estate-residential secured for business purpose7,600 8.6 8.0 7,491 8.6 7.9 \n\nReal estate-residential secured for personal purpose6,341 7.2 13.9 7,222 8.3 14.6 \n\nReal estate-home equity secured for personal purpose1,638 1.9 2.9 1,706 2.0 2.7 \n\nLoans to individuals348 0.4 0.2 342 0.4 0.3 \n\nLease financings2,614 3.0 3.4 2,460 2.8 3.6 \n\nTotal$88,165 100.0 %100.0 %$87,091 100.0 %100.0 %\n\nAt December 31, 2025, the allowance for credit losses on individually analyzed loans was $3.0 million, or 22.9% of the balance of individually analyzed loans of $13.2 million. At December 31, 2024, the allowance for credit losses on individually analyzed loans was $1.9 million, or 16.1% of the balance of individually analyzed loans of $12.1 million.\n\nGoodwill and Other Intangible Assets\n\nGoodwill and other intangible assets have been recorded on the books of the Corporation in connection with acquisitions. There was no impairment of goodwill or identifiable intangibles recorded during 2023 through 2025. There can be no assurance that future impairment assessments or tests will not result in a charge to earnings.\n\n44\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nLIABILITIES\n\nThe following table presents liabilities at the dates indicated:\n\nAt December 31,\n\n(Dollars in thousands)20252024$ Change% Change\n\nDeposits$7,087,313 $6,759,259 $328,054 4.9 %\n\nShort-term borrowings24,411 11,181 13,230 118.3 \n\nLong-term debt200,000 225,000 (25,000)(11.1)\n\nSubordinated notes98,867 149,261 (50,394)(33.8)\n\nOperating lease liabilities28,531 31,485 (2,954)(9.4)\n\nAccrued interest payable and other liabilities54,457 64,930 (10,473)(16.1)\n\n  Total liabilities$7,493,579 $7,241,116 $252,463 3.5 %\n\nDeposits\n\nTotal deposits increased $328.1 million, or 4.9%, from December 31, 2024, primarily due to increases in commercial, brokered and public funds deposits, partially offset by a decrease in consumer deposits. At December 31, 2025, noninterest-bearing deposits totaled $1.4 billion and represented 20.2% of total deposits, compared to $1.4 billion representing 20.9% at December 31, 2024. Unprotected deposits, which excludes insured, internal, and collateralized deposit accounts, totaled $1.6 billion and $1.5 billion at December 31, 2025 and 2024, respectively. This represented 23.2% of total deposits at December 31, 2025 compared to 22.0% at December 31, 2024.\n\nTable 10—Deposits\n\nThe following table summarizes the average amount of deposits for the periods indicated:\n\nFor the Years Ended December 31,\n\n(Dollars in thousands)202520242023\n\nNoninterest-bearing deposits$1,406,985 $1,380,178 $1,646,286 \n\nInterest-bearing checking deposits1,281,075 1,191,634 1,034,327 \n\nMoney market savings1,920,600 1,801,035 1,611,169 \n\nRegular savings720,718 740,493 871,332 \n\nTime deposits1,485,281 1,413,589 931,944 \n\nTotal average deposits$6,814,659 $6,526,929 $6,095,058 \n\nAt December 31, 2025 and 2024, the Corporation had $3.4 billion and $3.2 billion, respectively, in uninsured deposits in excess of the FDIC insurance limit of $250,000. At December 31, 2025 and 2024, the Corporation had $281.9 million and $276.0 million, respectively, in time deposits in excess of $250,000 maturing disclosed in the table below. Brokered deposits in the amount of $405.1 million and $360.0 million at December 31, 2025 and December 31, 2024, respectively, are not included in time deposits more than $250,000.\n\n(Dollars in thousands)For the Years Ended December 31,\n\nMaturity Period20252024\n\nDue Three Months or Less$108,462 $76,621 \n\nDue Over Three Months to Six Months81,603 94,290 \n\nDue Over Six Months to Twelve Months76,954 81,338 \n\nDue Over Twelve Months14,864 23,734 \n\nTotal$281,883 $275,983 \n\n45\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nBorrowings\n\nTotal borrowings decreased $62.2 million from December 31, 2024, primarily due to a $100.0 million redemption of previously issued subordinated notes partially offset by $50.0 million aggregate principal amount fixed-to-floating rate subordinated notes issued in the third quarter of 2025, and pay-downs of $25.0 million in long-term debt. These decreases were partially offset by an increase of $13.2 million in customer repurchase agreements.\n\nShort-term borrowings at December 31, 2025 consisted of $24.4 million of customer repurchase agreements. Long-term debt at December 31, 2025 consisted of $200.0 million of FHLB advances and $98.9 million of subordinated notes. At December 31, 2025 and 2024, the Bank had outstanding short-term letters of credit with the FHLB totaling $1.4 billion and $1.3 billion, respectively, which were utilized to collateralize public fund deposits and other secured deposits.\n\nOther Liabilities\n\nOther liabilities decreased $10.5 million, or 16.1%, from December 31, 2024, primarily due to a decrease in accrued interest payable on time deposits.\n\nSHAREHOLDERS' EQUITY\n\nThe following table presents total shareholders' equity at the dates indicated:\n\nAt December 31,\n\n(Dollars in thousands)20252024$ Change% Change\n\nCommon stock$157,784 $157,784 $— — %\n\nAdditional paid-in capital304,021 302,829 1,192 0.4 \n\nRetained earnings591,202 525,780 65,422 12.4 \n\nAccumulated other comprehensive loss(25,467)(43,992)18,525 (42.1)\n\nTreasury stock(84,222)(55,100)(29,122)52.9 \n\n  Total shareholders' equity $943,318 $887,301 $56,017 6.3 %\n\nThe increase in shareholders' equity at December 31, 2025 of $56.0 million from December 31, 2024 was primarily related to an increase in retained earnings of $65.4 million. Retained earnings was impacted by net income of $90.8 million, partially offset by $25.0 million in cash dividends paid during the year. Accumulated other comprehensive loss decreased by $18.5 million, which was primarily attributable to increases in the fair value of available-for-sale investment securities of $13.6 million, net of tax, and an increase in unrecognized actuarial losses related to the Corporation's pension plan of $3.9 million, net of tax. Treasury stock increased $29.1 million from December 31, 2024, related to repurchases of 1,129,217 shares at a cost of $34.6 million, offset by $5.5 million of stock issued under the dividend reinvestment plan and employee stock purchase plan, and stock-based incentive plan activity.\n\nDiscussion of Segments\n\nThe Corporation has three operating segments: Banking, Wealth Management and Insurance. Detailed segment information appears in Note 23, \"Segment Reporting\" included in the Notes to the Consolidated Financial Statements under Item 8 of this Form 10-K.\n\nThe Banking segment reported pre-tax income of $115.6 million in 2025, $96.1 million in 2024 and $90.3 million in 2023. See the section of this Management's Discussion and Analysis under the heading \"Results of Operations\" and \"Financial Condition\" for a discussion of the key items impacting the Banking Segment.\n\nThe Wealth Management segment reported pre-tax income of $8.3 million in 2025, $6.1 million in 2024 and $5.0 million in 2023, which included noninterest income of $31.9 million in 2025, $29.9 million in 2024 and $26.8 million in 2023. Noninterest expense was $23.7 million in 2025, $23.9 million in 2024 and $21.8 million in 2023. The increases in noninterest income from 2024 and 2023 were primarily due to new customer relationships and appreciation of assets under management and supervision. Noninterest expense in 2025 compared to 2024 was relatively unchanged, while the increase in noninterest expense from 2023 to 2024 was primarily due to increases in salaries and commissions. Wealth Management assets under management and supervision were $5.9 billion as of December 31, 2025, $5.2 billion as of December 31, 2024 and $4.7 billion as of December 31, 2023.\n\n46\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nThe Insurance segment reported pre-tax income of $5.5 million in 2025, $5.7 million in 2024 and $5.1 million in 2023, which included noninterest income of $22.5 million in 2025 and 2024 and $21.5 million in 2023. Noninterest expense was $16.9 million in 2025, $16.7 million in 2024 and $16.4 million in 2023. Noninterest income in 2025 compared to 2024 was relatively unchanged, reflecting an increase in revenue from commercial lines of $672 thousand being offset by a decrease in contingent commission income of $691 thousand. The increases in noninterest expense were primarily due to increases in salaries and commissions.\n\nCapital Adequacy\n\nCapital guidelines assign minimum capital requirements for categories of assets depending on their assigned risks. The components of risk-based capital for the Corporation are Tier 1 and Tier 2.\n\nAt December 31, 2025, the Corporation had a Tier 1 risk-based capital ratio of 11.22% and total risk-based capital ratio of 13.86%. At December 31, 2024, the Corporation had a Tier 1 capital ratio of 10.85% and total risk-based capital ratio of 14.19%. The Corporation continues to be in the \"well-capitalized\" category under regulatory standards. Details on the capital ratios can be found in Note 21, \"Regulatory Matters,\" included in the Notes to the Consolidated Financial Statements under Item 8 of this Form 10-K along with a discussion on dividend and other restrictions.\n\nAsset/Liability Management\n\nThe 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.\n\nThe 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.\n\nInterest Rate Sensitivity\n\nInterest rate sensitivity is a function of the repricing characteristics of the Corporation's assets and liabilities. Minimizing the balance sheet's maturity and repricing risk is a continual focus. The Corporation uses a variety of techniques to assist in identifying and evaluating the potential range of risk, including a maturity/repricing gap analysis as well as an Earnings at Risk analysis under various interest rate scenarios.\n\nThe gap analysis identifies repricing gaps in the Corporation’s balance sheet. All assets and liabilities are modeled to reflect some level of behavioral optionality, such as prepayments on loans, early call features on investments or potential pricing change and/or product change to interest-bearing deposits. The Corporation projects all noninterest-bearing deposits to be considered non-rate sensitive, while utilizing an all-encompassing deposit beta assumption that captures changes in interest expense that may occur as interest rates change or balances shift into other products. These assumptions are based upon historic behavior; however, they are inherently uncertain and thus cannot precisely predict the impact of changes in interest rates. While actual results will differ from simulated results due to customer behavioral change and/or market and regulatory influences, the following models are important tools to guide management.\n\n47\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nTable 11—Interest Rate Sensitivity Gap Analysis\n\nThe following table presents the Corporation's gap analysis at December 31, 2025:\n\n(Dollars in thousands)Within Three MonthsAfter Three Months to Twelve MonthsAfter One Year to Five YearsOver Five YearsNon-Rate SensitiveTotal\n\nAssets:\n\nCash and due from banks$— $— $— $— $63,579 $63,579 \n\nInterest-earning deposits with other banks490,133 ------------490,133 \n\nInvestment securities, net of allowance for credit losses70,003 43,901 181,185 223,208 (22,008)496,289 \n\nFederal Home Loan Bank, Federal Reserve Bank and other stock, at cost------------37,808 37,808 \n\nLoans held for sale11,058 ---------4,230 15,288 \n\nLoans and leases, net of allowance for credit losses2,551,201 704,999 2,997,771 647,660 (74,992)6,826,639 \n\nOther assets------------507,161 507,161 \n\nTotal assets$3,122,395 $748,900 $3,178,956 $870,868 $515,778 $8,436,897 \n\nLiabilities and shareholders' equity:\n\nNoninterest-bearing deposits $ ---  $ ---  $ ---  $ --- $1,431,974 $1,431,974 \n\nInterest-bearing demand deposits3,478,924 ------------3,478,924 \n\nSavings deposits762,130 ------------762,130 \n\nTime deposits375,740 584,127 454,038 380 ---1,414,285 \n\nBorrowings73,278 50,000 200,000 ------323,278 \n\nOther liabilities------------82,988 82,988 \n\nShareholders' equity------------943,318 943,318 \n\nTotal liabilities and shareholders' equity$4,690,072 $634,127 $654,038 $380 $2,458,280 $8,436,897 \n\nIncremental gap$(1,567,677)$114,773 $2,524,918 $870,488 $(1,942,502)\n\nCumulative gap$(1,567,677)$(1,452,904)$1,072,014 $1,942,502 \n\nCumulative gap as a percentage of interest-earning assets(19.7%)(18.3%)13.5%24.4%\n\nThe table above indicates that the Corporation holds a greater amount of liabilities that have the opportunity to reprice over assets in the next twelve months. This table is limited as it does not take into consideration the magnitude of the repricing change in relation to interest rate changes. Further, the estimated sensitivities are based upon a number of assumptions, including the timing and magnitude of interest rate changes, prepayments on loans receivable and securities, pricing strategies on loans receivable and deposits, and replacement of asset and liability cash flows. While the assumptions used are bank specific and based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions, including how customer preferences or competitor influences might change.\n\nTable 12—Net Interest Income - Summary of Earnings at Risk Simulation\n\nManagement also performs a simulation of net interest income to measure interest rate exposure. The following table demonstrates the anticipated impact of an instantaneous and parallel interest rate shift, or \"shock,\" to the yield curve on the Corporation's net interest income over the next twelve months. This simulation incorporates the same assumptions noted above and assumes a static balance sheet with no incremental growth in interest-earning assets or interest-bearing liabilities over the next twelve months.\n\n48\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nThe changes to net interest income are shown in the below table at December 31, 2025. The results suggest the Corporation's year-end balance sheet is asset sensitive as net interest income is projected to increase in a rising rate environment. Actual results will likely be different than modeled due to numerous factors, including interest rates earned on new loans and investments as well as rates paid on new and existing deposits and new borrowings. The changes to net interest income shown below are in compliance with the Corporation's policy guidelines.\n\nEstimated Change in Net Interest Income Over Next 12 Months\n\n(Dollars in thousands)AmountPercent\n\nRate shock - Change in interest rates\n\n+300 basis points$14,807 5.47%\n\n+200 basis points10,382 3.84 \n\n+100 basis points5,817 2.15 \n\n-100 basis points(7,318)(2.70)\n\n-200 basis points(19,851)(7.34)\n\n-300 basis points(37,532)(13.87)\n\nThe estimated sensitivities are based upon a number of assumptions, including the timing and magnitude of interest rate changes, prepayments on loans receivable and securities, pricing strategies on loans receivable and deposits, and replacement of asset and liability cash flows. While the assumptions used are bank specific and based on current economic and local market conditions, there is no assurance as to the predictive nature of these conditions, including how customer preferences or competitor influences might change.\n\nCredit Risk\n\nOriginating loans exposes the Corporation to credit risk, which is the risk that the principal balance of a loan and any related interest will not be collected due to the inability of the borrower to repay the loan. The Corporation manages credit risk in the loan portfolio through adherence to consistent and conservative underwriting standards and policies established by the senior credit leadership and approved by the Board of Directors. Written loan policies establish underwriting standards, lending limits and other standards or limits as deemed necessary and prudent. While the Corporation has strict underwriting, review, and monitoring procedures in place, they cannot eliminate all of the risks related to these lending activities.\n\nThe Corporation's loan review department conducts ongoing, independent reviews of the lending process to ensure adherence to established policies and procedures, monitors compliance with applicable laws and regulations and provides objective measurement of the risk inherent in the loan portfolio.\n\nThe Corporation focuses on both assessing the borrower's capacity and willingness to repay and obtaining sufficient collateral. Commercial, financial and agricultural loans are generally secured by the borrower's assets and by personal guarantees. Commercial real estate, construction and residential real estate secured for business purposes loans are originated primarily within the Pennsylvania, Maryland, Delaware and New Jersey market areas at prudent loan-to-value ratios and are often additionally supported by guaranties. Management closely monitors the composition and quality of the total commercial loan portfolio to ensure that any credit concentrations by borrower or industry are identified and managed. See \"Risk Factors\" included herein under Item 1A for additional information on lending risk related to commercial loans.\n\nThe Corporation originates fixed-rate and adjustable-rate residential mortgage loans that are secured by the underlying 1- to 4-family residential properties for personal purposes. Credit risk exposure in this area of lending is minimized by the evaluation of the creditworthiness of the borrower, including debt-to-income ratios, credit scores and adherence to underwriting policies that emphasize conservative loan-to-value ratios of generally no more than 80%. Residential mortgage loans granted in excess of the 80% loan-to-value ratio are generally insured by private mortgage insurance.\n\nCredit risk in the consumer loan portfolio is controlled by strict adherence to underwriting standards that consider debt-to-income levels and the creditworthiness of the borrower and, if secured, collateral values. In the home equity loan portfolio, combined loan-to-value ratios are generally limited to 80%, but may be increased to 85% for the Corporation's strongest profile borrowers. Other credit considerations and compensating factors may warrant higher combined loan-to-value ratios. These loans are included within the portfolio of loans to individuals.\n\nThe primary risks that are involved with lease financing receivables are credit underwriting and borrower industry concentrations. The Corporation has strict underwriting, review, and monitoring procedures in place to mitigate these risks.\n\n49\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nRisk also lies in the residual value of the underlying equipment. Residual values are subject to judgments as to the value of the underlying equipment that can be affected by changes in economic and market conditions and the financial viability of the residual guarantors and insurers. To the extent not guaranteed or assumed by a third party, or otherwise insured against, the Corporation bears the risk of ownership of the leased assets. This includes the risk that the actual value of the leased assets at the end of the lease term will be less than the residual value. The Corporation greatly reduces this risk primarily by using $1.00 buyout leases and equipment finance agreements, in which the entire cost of the leased equipment is included in the contractual payments, leaving no residual payment at the end of the lease term for the majority of the lease portfolio.\n\nThe Corporation closely monitors delinquencies as another means of maintaining asset quality. Collection efforts begin after a loan payment is missed, by attempting to contact borrowers. If collection attempts fail, the Corporation will proceed to gain control of collateral in a timely manner to minimize losses. While liquidation and recovery efforts continue, officers continue to work with the borrowers, if appropriate, to recover monies owed to the Corporation.\n\nLiquidity\n\nThe 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.\n\nThe 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 $549.2 million and $327.8 million at December 31, 2025 and December 31, 2024, respectively. Unencumbered securities classified as available-for-sale, which provide additional sources of liquidity, totaled $37.3 million and $55.4 million at December 31, 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 $3.8 billion and $3.7 billion at December 31, 2025 and December 31, 2024, respectively, of which $2.3 billion and $2.1 billion was available as of December 31, 2025 and December 31, 2024, respectively. The Corporation and its subsidiaries also maintained uncommitted funding sources from correspondent banks of $457.0 million at December 31, 2025 and $468.0 million at December 31, 2024. Future availability under these uncommitted funding sources is subject to the prerogatives of the granting banks and may be withdrawn at will.\n\nSources of Funds\n\nNon-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.\n\nAs 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.\n\nCash Requirements\n\nThe 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 December 31, 2025 totaled $960.1 million. If these deposits do not remain with the Bank, the Bank will be required to seek other sources of funds, which may be more expensive to obtain. 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.\n\nCommitments 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.\n\n50\n\n[Table of Contents](#i6bbaaaf3878f49499ffe998dd81ccacb_7)\n\nRecent Accounting Pronouncements\n\nFor information regarding recent accounting pronouncements, refer to Note 1, \"Summary of Significant Accounting Policies\" of this Form 10-K."}