Company Quick10K Filing
Quick10K
Univest of Pennsylvania
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$25.96 29 $760
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-11-08 Quarter: 2016-11-08
10-Q 2016-08-08 Quarter: 2016-08-08
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-01-24 Earnings, Exhibits
8-K 2019-01-24 Earnings, Exhibits
8-K 2018-12-13 Amend Bylaw, Regulation FD, Exhibits
8-K 2018-12-06 Officers
8-K 2018-12-03 Other Events, Exhibits
8-K 2018-11-01 Regulation FD, Exhibits
8-K 2018-10-25 Earnings, Exhibits
8-K 2018-10-01 Officers
8-K 2018-08-27 Other Events, Exhibits
8-K 2018-07-31 Regulation FD, Exhibits
8-K 2018-07-26 Earnings, Regulation FD, Exhibits
8-K 2018-06-12 Regulation FD, Exhibits
8-K 2018-05-31 Regulation FD
8-K 2018-05-21 Other Events, Exhibits
8-K 2018-05-15 Regulation FD, Exhibits
8-K 2018-04-26 Earnings, Other Events, Exhibits
8-K 2018-04-18 Shareholder Vote
8-K 2018-02-28 Officers
8-K 2018-01-24 Earnings, Exhibits
8-K 2018-01-02 Officers
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UVSP 2018-09-30
Part I. Financial Information
Item 1. Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Earnings per Share
Note 3. Investment Securities
Note 4. Loans and Leases
Note 5. Goodwill and Other Intangible Assets
Note 6. Deposits
Note 7. Borrowings
Note 8. Retirement Plans and Other Postretirement Benefits
Note 9. Stock-Based Incentive Plan
Note 10. Accumulated Other Comprehensive (Loss) Income
Note 11. Derivative Instruments and Hedging Activities
Note 12. Fair Value Disclosures
Note 13. Segment Reporting
Note 14. Revenue From Contracts with Customers
Note 15. Restructuring Charges
Note 16. Contingencies
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 usvp093018ex311.htm
EX-31.2 usvp093018ex312.htm
EX-32.1 usvp093018ex321.htm
EX-32.2 usvp093018ex322.htm

Univest of Pennsylvania Earnings 2018-09-30

UVSP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 uvsp10q093018.htm 10-Q Document

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 Form 10-Q
 
 
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2018.
or
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                      to                     .
Commission File Number: 0-7617
 
 

 UNIVEST CORPORATION OF PENNSYLVANIA
(Exact name of registrant as specified in its charter)
 
 
Pennsylvania
 
23-1886144
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer
Identification No.)
14 North Main Street, Souderton, Pennsylvania 18964
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (215) 721-2400
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
¨
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $5 par value
 
29,314,818
(Title of Class)
 
(Number of shares outstanding at October 31, 2018)
 
 




UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
INDEX
 
 
 
Page Number
Part I.
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
Part II.
 
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.
 
 


1


PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
UNIVEST CORPORATION OF PENNSYLVANIA
CONDENSED CONSOLIDATED BALANCE SHEETS

 
(UNAUDITED)
 
 
(Dollars in thousands, except share data)
At September 30, 2018
 
At December 31, 2017
ASSETS
 
Cash and due from banks
$
52,200

 
$
46,721

Interest-earning deposits with other banks
31,910

 
28,688

Investment securities held-to-maturity (fair value $105,642 and $55,320 at September 30, 2018 and December 31, 2017, respectively)
108,142

 
55,564

Investment securities available-for-sale
336,933

 
391,457

Investments in equity securities
2,264

 
7,061

       Federal Home Loan Bank, Federal Reserve Bank and other stock, at cost
33,071

 
27,204

Loans held for sale
106

 
1,642

Loans and leases held for investment
3,866,169

 
3,620,067

Less: Reserve for loan and lease losses
(27,371
)
 
(21,555
)
Net loans and leases held for investment
3,838,798

 
3,598,512

Premises and equipment, net
60,393

 
61,797

Goodwill
172,559

 
172,559

Other intangibles, net of accumulated amortization and fair value adjustments of $24,423 and $21,825 at September 30, 2018 and December 31, 2017, respectively
12,405

 
13,909

Bank owned life insurance
110,392

 
108,246

Accrued interest receivable and other assets
42,825

 
41,502

Total assets
$
4,801,998

 
$
4,554,862

LIABILITIES
 
 
 
Noninterest-bearing deposits
$
1,047,081

 
$
1,040,026

Interest-bearing deposits:
 
 
 
Demand deposits
1,350,720

 
1,109,438

Savings deposits
750,764

 
830,706

Time deposits
671,483

 
574,749

Total deposits
3,820,048

 
3,554,919

Short-term borrowings
86,765

 
105,431

Long-term debt
145,430

 
155,828

Subordinated notes
94,514

 
94,331

Accrued interest payable and other liabilities
40,999

 
40,979

Total liabilities
4,187,756

 
3,951,488

SHAREHOLDERS’ EQUITY
 
 
 
Common stock, $5 par value: 48,000,000 shares authorized at September 30, 2018 and December 31, 2017; 31,556,799 shares issued at September 30, 2018 and December 31, 2017; 29,407,076 and 29,334,859 shares outstanding at September 30, 2018 and December 31, 2017, respectively
157,784

 
157,784

Additional paid-in capital
291,992

 
290,133

Retained earnings
235,658

 
216,761

Accumulated other comprehensive loss, net of tax benefit
(28,664
)
 
(17,771
)
Treasury stock, at cost; 2,149,723 and 2,221,940 shares at September 30, 2018 and December 31, 2017, respectively
(42,528
)
 
(43,533
)
Total shareholders’ equity
614,242

 
603,374

Total liabilities and shareholders’ equity
$
4,801,998

 
$
4,554,862

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

2


UNIVEST CORPORATION OF PENNSYLVANIA
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(Dollars in thousands, except per share data)
2018
 
2017
 
2018
 
2017
Interest income
 
Interest and fees on loans and leases:
 
 
 
 
 
 
 
Taxable
$
43,066

 
$
37,153

 
$
121,653

 
$
105,955

Exempt from federal income taxes
2,501

 
2,106

 
7,269

 
6,225

Total interest and fees on loans and leases
45,567

 
39,259

 
128,922

 
112,180

Interest and dividends on investment securities:
 
 
 
 
 
 
 
Taxable
2,348

 
1,855

 
6,805

 
5,376

Exempt from federal income taxes
459

 
550

 
1,404

 
1,725

Interest on deposits with other banks
397

 
133

 
621

 
188

Interest and dividends on other earning assets
484

 
375

 
1,497

 
1,129

Total interest income
49,255

 
42,172

 
139,249

 
120,598

Interest expense
 
 
 
 
 
 
 
Interest on deposits
6,278

 
3,068

 
14,511

 
7,720

Interest on short-term borrowings
584

 
169

 
2,187

 
756

Interest on long-term debt and subordinated notes
1,970

 
2,048

 
5,866

 
5,652

Total interest expense
8,832

 
5,285

 
22,564

 
14,128

Net interest income
40,423

 
36,887

 
116,685

 
106,470

Provision for loan and lease losses
2,745

 
2,689

 
20,207

 
7,900

Net interest income after provision for loan and lease losses
37,678

 
34,198

 
96,478

 
98,570

Noninterest income
 
 
 
 
 
 
 
Trust fee income
1,960

 
1,924

 
6,000

 
5,847

Service charges on deposit accounts
1,454

 
1,371

 
4,116

 
3,927

Investment advisory commission and fee income
3,785

 
3,455

 
11,246

 
9,969

Insurance commission and fee income
3,643

 
3,492

 
12,243

 
11,530

Other service fee income
2,284

 
2,123

 
6,884

 
6,355

Bank owned life insurance income
865

 
742

 
2,744

 
3,147

Net gain on sales of investment securities

 
7

 
10

 
43

Net gain on mortgage banking activities
754

 
908

 
2,412

 
3,558

Other income
116

 
87

 
102

 
712

Total noninterest income
14,861

 
14,109

 
45,757

 
45,088

Noninterest expense
 
 
 
 
 
 
 
Salaries, benefits and commissions
20,321

 
19,185

 
61,033

 
56,652

Net occupancy
2,515

 
2,523

 
7,805

 
7,872

Equipment
1,042

 
1,019

 
3,132

 
3,043

Data processing
2,339

 
2,118

 
6,662

 
6,257

Professional fees
1,370

 
1,447

 
4,056

 
3,934

Marketing and advertising
461

 
271

 
1,368

 
1,125

Deposit insurance premiums
544

 
409

 
1,387

 
1,262

Intangible expenses
479

 
690

 
1,685

 
1,895

Restructuring charges

 

 
571

 

Other expense
5,300

 
5,033

 
16,144

 
15,233

Total noninterest expense
34,371

 
32,695

 
103,843

 
97,273

Income before income taxes
18,168

 
15,612

 
38,392

 
46,385

Income tax expense
3,204

 
4,416

 
6,221

 
12,555

Net income
$
14,964

 
$
11,196

 
$
32,171

 
$
33,830

Net income per share:
 
 
 
 
 
 
 
Basic
$
0.51

 
$
0.42

 
$
1.10

 
$
1.27

Diluted
0.51

 
0.42

 
1.09

 
1.27

Dividends declared
0.20

 
0.20

 
0.60

 
0.60

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

3


UNIVEST CORPORATION OF PENNSYLVANIA
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
 
Three Months Ended September 30,
(Dollars in thousands)
2018
 
2017
Before
Tax
Amount
 
Tax
Expense
(Benefit)
 
Net of
Tax
Amount
 
Before
Tax
Amount
 
Tax
Expense
(Benefit)
 
Net of
Tax
Amount
Income
$
18,168

 
$
3,204

 
$
14,964

 
$
15,612

 
$
4,416

 
$
11,196

Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 
 
Net unrealized (losses) gains on available-for-sale investment securities:
 
 
 
 
 
 
 
 
 
 
 
Net unrealized holding (losses) gains arising during the period
(1,122
)
 
(236
)
 
(886
)
 
1,030

 
362

 
668

Less: reclassification adjustment for net gains on sales realized in net income (1)

 

 

 
(7
)
 
(2
)
 
(5
)
Total net unrealized (losses) gains on available-for-sale investment securities
(1,122
)
 
(236
)
 
(886
)
 
1,023

 
360

 
663

Net unrealized gains (losses) on interest rate swaps used in cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Net unrealized holding gains (losses) arising during the period
79

 
17

 
62

 
(20
)
 
(7
)
 
(13
)
Less: reclassification adjustment for net losses realized in net income (2)
1

 

 
1

 
41

 
14

 
27

Total net unrealized gains on interest rate swaps used in cash flow hedges
80

 
17

 
63

 
21

 
7

 
14

Defined benefit pension plans:
 
 
 
 
 
 
 
 
 
 
 
Amortization of net actuarial loss included in net periodic pension costs (3)
281

 
60

 
221

 
320

 
112

 
208

Accretion of prior service cost included in net periodic pension costs (3)
(70
)
 
(15
)
 
(55
)
 
(71
)
 
(25
)
 
(46
)
Total defined benefit pension plans
211

 
45

 
166

 
249

 
87

 
162

Other comprehensive (loss) income
(831
)
 
(174
)
 
(657
)
 
1,293

 
454

 
839

Total comprehensive income
$
17,337

 
$
3,030

 
$
14,307

 
$
16,905

 
$
4,870

 
$
12,035

(1) Included in net gain on sales of investment securities on the consolidated statements of income (before tax amount).
(2) Included in interest expense on deposits on the consolidated statements of income (before tax amount).
(3) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (before tax amount). See Note 8, "Retirement Plans and Other Postretirement Benefits" for additional details.

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


4


 
Nine Months Ended September 30,
(Dollars in thousands)
2018
 
2017
Before
Tax
Amount
 
Tax
Expense
(Benefit)
 
Net of
Tax
Amount
 
Before
Tax
Amount
 
Tax
Expense
(Benefit)
 
Net of
Tax
Amount
Income
$
38,392

 
$
6,221

 
$
32,171

 
$
46,385

 
$
12,555

 
$
33,830

Other comprehensive (loss) income:
 
 
 
 
 
 
 
 
 
 
 
Net unrealized (losses) gains on available-for-sale investment securities:
 
 
 
 
 
 
 
 
 
 
 
Net unrealized holding (losses) gains arising during the period
(9,371
)
 
(1,968
)
 
(7,403
)
 
4,082

 
1,430

 
2,652

Less: reclassification adjustment for net gains on sales realized in net income (1)
(10
)
 
(2
)
 
(8
)
 
(43
)
 
(15
)
 
(28
)
Total net unrealized (losses) gains on available-for-sale investment securities
(9,381
)
 
(1,970
)
 
(7,411
)
 
4,039

 
1,415

 
2,624

Net unrealized gains on interest rate swaps used in cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
Net unrealized holding gains (losses) arising during the period
445

 
93

 
352

 
(105
)
 
(37
)
 
(68
)
Less: reclassification adjustment for net losses realized in net income (2)
27

 
6

 
21

 
148

 
52

 
96

Total net unrealized gains on interest rate swaps used in cash flow hedges
472

 
99

 
373

 
43

 
15

 
28

Defined benefit pension plans:
 
 
 
 
 
 
 
 
 
 
 
Amortization of net actuarial loss included in net periodic pension costs (3)
844

 
177

 
667

 
918

 
321

 
597

Accretion of prior service cost included in net periodic pension costs (3)
(212
)
 
(44
)
 
(168
)
 
(212
)
 
(74
)
 
(138
)
Total defined benefit pension plans
632

 
133

 
499

 
706

 
247

 
459

Other comprehensive (loss) income
(8,277
)
 
(1,738
)
 
(6,539
)
 
4,788

 
1,677

 
3,111

Total comprehensive income
$
30,115

 
$
4,483

 
$
25,632

 
$
51,173

 
$
14,232

 
$
36,941

(1) Included in net gain on sales of investment securities on the consolidated statements of income (before tax amount).
(2) Included in interest expense on deposits on the consolidated statements of income (before tax amount).
(3) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost (before tax amount). See Note 8, "Retirement Plans and Other Postretirement Benefits" for additional details.

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


5


UNIVEST CORPORATION OF PENNSYLVANIA
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands, except share and per share data)
Common
Shares
Outstanding
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Loss
 
Treasury
Stock
 
Total
Nine Months Ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
29,334,859

 
$
157,784

 
$
290,133

 
$
216,761

 
$
(17,771
)
 
$
(43,533
)
 
$
603,374

Adjustment to initially apply ASU No. 2016-01 for equity securities measured at fair value (1)

 

 

 
433

 
(433
)
 

 

Adjustment to initially apply ASU No. 2018-02 for reclassification of stranded net tax charges (1)

 

 

 
3,921

 
(3,921
)
 

 

Net income

 

 

 
32,171

 

 

 
32,171

Other comprehensive loss, net of income tax benefit

 

 

 

 
(6,539
)
 

 
(6,539
)
Cash dividends declared ($0.60 per share)

 

 

 
(17,629
)
 

 

 
(17,629
)
Stock issued under dividend reinvestment and employee stock purchase plans
62,271

 

 
140

 
1

 

 
1,598

 
1,739

Exercise of stock options
59,750

 

 
(43
)
 

 

 
1,174

 
1,131

Stock-based compensation

 

 
2,379

 

 

 

 
2,379

Purchases of treasury stock
(83,977
)
 

 

 

 

 
(2,384
)
 
(2,384
)
Restricted stock awards granted, net of cancellations
34,173

 

 
(617
)
 

 

 
617

 

Balance at September 30, 2018
29,407,076

 
$
157,784

 
$
291,992

 
$
235,658

 
$
(28,664
)
 
$
(42,528
)
 
$
614,242

(Dollars in thousands, except share and per share data)
Common
Shares
Outstanding
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Treasury
Stock
 
Total
Nine Months Ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016
26,589,353

 
$
144,559

 
$
230,494

 
$
194,516

 
$
(19,454
)
 
$
(44,906
)
 
$
505,209

Net income

 

 

 
33,830

 

 

 
33,830

Other comprehensive income, net of income tax

 

 

 

 
3,111

 

 
3,111

Cash dividends declared ($0.60 per share)

 

 

 
(15,983
)
 

 

 
(15,983
)
Stock issued under dividend reinvestment and employee stock purchase plans
63,683

 

 
130

 

 

 
1,709

 
1,839

Exercise of stock options
84,870

 

 
(121
)
 

 

 
1,648

 
1,527

Stock-based compensation

 

 
2,550

 

 

 

 
2,550

Purchases of treasury stock
(112,393
)
 

 

 

 

 
(3,285
)
 
(3,285
)
Restricted stock awards granted, net of cancellations
45,823

 

 
(881
)
 

 

 
881

 

Balance at September 30, 2017
26,671,336

 
$
144,559

 
$
232,172

 
$
212,363

 
$
(16,343
)
 
$
(43,953
)
 
$
528,798

(1) See Note 1, "Summary of Significant Accounting Policies - Accounting Pronouncements Adopted in 2018" for additional information.
Note: See accompanying notes to the unaudited condensed consolidated financial statements.

6


UNIVEST CORPORATION OF PENNSYLVANIA
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months Ended September 30,
(Dollars in thousands)
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
32,171

 
$
33,830

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Provision for loan and lease losses
20,207

 
7,900

Depreciation of premises and equipment
4,180

 
4,151

Net amortization of investment securities premiums and discounts
1,193

 
1,416

Net gain on sales of investment securities
(10
)
 
(43
)
Net gain on mortgage banking activities
(2,412
)
 
(3,558
)
Bank owned life insurance income
(2,744
)
 
(3,147
)
Net accretion of acquisition accounting fair value adjustments
(838
)
 
(2,572
)
Stock-based compensation
2,379

 
2,550

Intangible expenses
1,685

 
1,895

Other adjustments to reconcile net income to cash provided by (used in) operating activities
117

 
(286
)
Originations of loans held for sale
(95,665
)
 
(105,557
)
Proceeds from the sale of loans held for sale
99,842

 
112,602

Contributions to pension and other postretirement benefit plans
(3,199
)
 
(2,206
)
Decrease in accrued interest receivable and other assets
379

 
1,395

Increase (decrease) in accrued interest payable and other liabilities
4,021

 
(3,620
)
Net cash provided by operating activities
61,306

 
44,750

Cash flows from investing activities:
 
 
 
Net capital expenditures
(2,596
)
 
(5,040
)
Proceeds from maturities, calls and principal repayments of securities held-to-maturity
7,846

 
21,796

Proceeds from maturities, calls and principal repayments of securities available-for-sale
44,603

 
49,271

Proceeds from sales of securities available-for-sale
1,010

 
3,538

Purchases of investment securities held-to-maturity
(60,784
)
 
(42,585
)
Purchases of investment securities available-for-sale
(1,986
)
 
(9,974
)
Proceeds from sales of money market mutual funds
11,215

 
23,035

Purchases of money market mutual funds
(6,392
)
 
(18,875
)
Net increase in other investments
(5,867
)
 
(2,375
)
Net increase in loans and leases
(260,012
)
 
(204,866
)
Net increase in interest-earning deposits
(3,222
)
 
(22,546
)
Proceeds from sales of other real estate owned
362

 
3,996

Purchases of bank owned life insurance
(776
)
 

Proceeds from bank owned life insurance
1,374

 
2,937

Net cash used in investing activities
(275,225
)
 
(201,688
)
Cash flows from financing activities:
 
 
 
Net increase in deposits
265,260

 
261,402

Net decrease in short-term borrowings
(18,666
)
 
(164,080
)
Proceeds from issuance of long-term debt

 
95,000

Repayment of long-term debt
(10,000
)
 
(15,000
)
Payment of contingent consideration on acquisitions
(67
)
 
(5,380
)
Purchases of treasury stock
(2,384
)
 
(3,285
)
Stock issued under dividend reinvestment and employee stock purchase plans
1,739

 
1,839

Proceeds from exercise of stock options
1,131

 
1,527

Cash dividends paid
(17,615
)
 
(15,966
)
Net cash provided by financing activities
219,398

 
156,057

Net increase (decrease) in cash and due from banks
5,479

 
(881
)
Cash and due from banks at beginning of year
46,721

 
48,757

Cash and due from banks at end of period
$
52,200

 
$
47,876

Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
$
21,647

 
$
15,458

Cash paid for income taxes, net of refunds
1,315

 
12,448

Non cash transactions:
 
 
 
Transfer of loans to other real estate owned
$
477

 
$
649

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

7


UNIVEST CORPORATION OF PENNSYLVANIA AND SUBSIDIARIES
Notes to the Condensed Unaudited Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying unaudited consolidated financial statements include the accounts of Univest Corporation of Pennsylvania (the Corporation or Univest) and its wholly owned subsidiaries. The Corporation’s direct subsidiary is Univest Bank and Trust Co. (the Bank). All significant intercompany balances and transactions have been eliminated in consolidation. The unaudited interim consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations for interim financial information. The accompanying unaudited consolidated financial statements reflect all adjustments which are of a normal recurring nature and are, in the opinion of management, necessary for a fair presentation of the financial statements for the interim periods presented. Certain prior period amounts have been reclassified to conform to the current-year presentation. Operating results for the nine-month period ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ended December 31, 2018 or for any other period. It is suggested that these unaudited consolidated financial statements be read in conjunction with the audited financial statements and the notes thereto included in the registrant’s Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on March 1, 2018.
Use of Estimates
The preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes include fair value measurement of investment securities available-for-sale, reserve for loan and lease losses and purchase accounting.
Accounting Pronouncements Adopted in 2018

In February 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-02, "Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income." This ASU clarifies the accounting treatment of the reclassification of certain income tax effects within accumulated other comprehensive income as a result of the Tax Cuts and Jobs Act. The Corporation elected to early adopt this guidance effective January 1, 2018 for all stranded tax effects resulting from tax reform and reclassified stranded tax effects, totaling $3.9 million, from accumulated other comprehensive income to retained earnings. The Corporation's policy for releasing income tax effects from accumulated other comprehensive income is to release such effects on an individual basis as each item is liquidated, sold or extinguished. See Note 10, "Accumulated Other Comprehensive (Loss) Income" for additional detail.
In March 2017, the FASB issued ASU No. 2017-07, "Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The amendments in this ASU require that an employer that sponsors defined benefit pension plans and other postretirement plans present the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. Other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The Corporation adopted this guidance effective January 1, 2018 with retrospective application for prior period presentation. Effective January 1, 2018, components of net benefit income other than the service cost component are presented in the Corporation's statement of income in other noninterest expense rather than in salaries, benefits and commission expense. Prior period components of net benefit income other than the service cost component were reclassed to other noninterest expense in the Corporation's statement of income.

In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities." This ASU addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The ASU requires equity investments to be measured at fair value with changes in fair value recognized in net income. At December 31, 2017, the Corporation had financial services equity securities with a carrying value of $1.1 million which included an unrealized net gain of $666 thousand. At December 31, 2017, $433 thousand

8


was recorded in accumulated other comprehensive income which represented the unrealized net gain, net of income taxes, based on the Corporation’s statutory tax rate as of December 31, 2017. In addition, at December 31, 2017, the Corporation had money market mutual funds with a fair value and amortized cost of $6.0 million which were reclassified to equity securities under this guidance. The Corporation adopted this guidance effective January 1, 2018 with a cumulative-effect adjustment to the balance sheet as of January 1, 2018. The balance in accumulated other comprehensive income of $433 thousand was reclassified to retained earnings effective January 1, 2018. The carrying value of the equity securities, at January 1, 2018, did not change; however, any future increases or decreases in fair value is recorded as an increase or decrease to the carrying value and recognized in other noninterest income. During the nine months ended September 30, 2018, the Corporation recognized a $26 thousand net gain on equity securities in other noninterest income.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)” and subsequent related updates. The Corporation adopted the guidance effective January 1, 2018 using the modified retrospective method though no adjustments were made to retained earnings as a result of the adoption. The Corporation provided expanded disclosures related to recognition of revenue from contracts with customers. See Note 14, "Revenue from Contracts with Customers."
Recent Accounting Pronouncements Yet to Be Adopted
In August 2018, the FASB issued ASU No. 2018-14, "Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans." The amendments in this ASU modify the disclosure requirements for employers that sponsor defined benefit plans or other postretirement plans. Disclosures removed by this ASU include the following: 1) amounts in accumulated other comprehensive income expected to be recognized in net periodic benefit costs over the next fiscal year; 2) amount and timing of plan assets expected to be returned to the employer; and 3) the effects of a one percentage point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for postretirement health care benefits. Additional disclosures required by this ASU include: 1) the weighted-average interest crediting rates used in an entity's cash balance pension plans and other similar plans and 2) explanations for reasons for significant changes in the benefit obligation or plan assets. All amendments should be applied retrospectively. This ASU is effective for fiscal years ending after December 15, 2020 or December 31, 2020 for the Corporation. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statement disclosures but will result in revised disclosures for retirement plans and other postretirement benefits.
In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement." This ASU applies to all entities that are required, under existing GAAP, to make disclosures about recurring or nonrecurring fair value measurements. Disclosures removed by this ASU are the amount and reasons for transfers between Level 1 and Level 2, the policy for timing of transfers between levels and the valuation processes for Level 3 measurements. This ASU modifies disclosures relating to investments in certain entities that calculate net asset value. Additional disclosures required by this ASU include: 1) change in unrealized gains and losses included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and 2) range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The prospective method of transition is required for the new disclosure requirements. The other amendments should be applied retrospectively. This ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years or January 1, 2020 for the Corporation. Early adoption is permitted. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements but will result in revised disclosures for fair value.
In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities." The amendments in this update expand and refine hedge accounting for both non-financial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Additional hedging strategies permitted for hedge accounting include: hedges of contractually-specified price components of commodity purchases or sales, hedges of the benchmark rate component of the contractual coupon cash flows of fixed-rate assets or liabilities, hedges of the portion of a closed portfolio of prepayable assets not expected to prepay, and partial-term hedges of fixed-rate assets or liabilities. The ASU amends the presentation and disclosure requirements and changes how entities assess effectiveness. The ASU eliminates the requirement to separately measure and report hedge ineffectiveness and requires all items that affect earnings be presented in the same income statement line as the hedged items. After initial qualification, the new guidance permits a qualitative effectiveness assessment for certain hedges instead of a quantitative test, such as a regression analysis, if the entity can reasonably support an expectation of high effectiveness throughout the term of the hedge. An initial quantitative test to establish that the hedge relationship is highly effective is still required. The ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entities, or January 1, 2019 for the Corporation. Early adoption is permitted, including an interim period. The amended presentation and disclosure guidance is required only prospectively. The Corporation will adopt this ASU on January 1, 2019 and does not expect the adoption will have a material impact on the Corporation's financial statements.

9


In March 2017, the FASB issued ASU No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This ASU shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date rather than the maturity of the security. Securities within the scope of this guidance are those that have explicit, non-contingent call features that are callable at fixed prices and on preset dates. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, or January 1, 2019 for the Corporation. Early adoption is permitted, including an interim period. This ASU is to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. At September 30, 2018, the Corporation had $11.3 million of callable debt securities. Upon implementation, using the modified retrospective basis effective January 1, 2019, the Corporation expects to record a cumulative-effect adjustment resulting in a reduction in the unamortized premium balance for certain callable debt securities of approximately $50 thousand and a reduction in retained earnings of approximately $40 thousand, net of tax, for the incremental amortization. This estimate could change due to changes in the Corporation's investments in callable securities prior to the adoption date. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.
In January 2017, the FASB issued ASU No. 2017-04, "Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." This ASU eliminates Step 2 of the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Public business entities that are SEC filers should adopt the amendments in this ASU for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, or for the Corporation's goodwill impairment test in 2020. Early adoption is permitted for goodwill impairment tests with measurement dates after January 1, 2017. The Corporation does not expect the adoption of this ASU will have a material impact on the Corporation's financial statements.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU requires businesses and other organizations to measure the current expected credit losses (CECL) on financial assets, such as loans, net investments in leases, certain debt securities, bond insurance and other receivables. The amendments affect entities holding financial assets and net investments in leases that are not accounted for at fair value through net income. Current GAAP requires an incurred loss methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. The amendments in this ASU replace the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonableness and supportable information to inform credit loss estimates. An entity should apply the amendments through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (modified-retrospective approach). Acquired credit impaired loans for which the guidance in Accounting Standards Codification (ASC) Topic 310-30 has been previously applied should prospectively apply the guidance in this ASU. A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. The ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those years for public business entities that are SEC filers, or January 1, 2020 for the Corporation. The Corporation is in the process of evaluating the impact of the adoption of this guidance on the Corporation's financial statements; however, it is anticipated that the reserve for loan and lease losses will increase upon adoption of CECL and that the increased reserve level will decrease shareholders' equity and regulatory capital and ratios.

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" and subsequent related updates to revise the accounting for leases. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases based on the present value of future lease payments. Lessor accounting activities are largely unchanged from existing lease accounting. Disclosures will be required by lessees and lessors to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Early adoption is permitted. This new guidance is effective for the first interim period within annual periods beginning after December 15, 2018, or January 1, 2019 for the Corporation.

The Corporation expects to adopt this new guidance effective January 1, 2019, retrospectively at the beginning of the period of adoption through a cumulative-effect adjustment to retained earnings at January 1, 2019. The Corporation expects to elect the package of practical expedients permitted under the transition guidance which among other things, allows carry forward of the

10


historical lease classification. All leases in which the Corporation is the lessee are classified as operating leases and will continue to be classified as such. The Corporation expects to continue to separately account for lease and non-lease components as historically reported and expects to elect the hindsight practical expedient to determine the lease term for existing leases. The Corporation is currently implementing a third party lease accounting system to assist with the measurement of lease liabilities and related right-of-use assets, the post-implementation administration aspect of lease accounting, and the applicable disclosures related to the new guidance. The Corporation has completed the initial scoping phase of the project, including the identification and review of lease contracts applicable to the new guidance, and is in the process of determining the estimated financial statement impact of the new guidance at the transition date. While the Corporation is continuing to assess the impact of this new guidance on the balance sheet and income statement, the Corporation expects to record between $30.0 million to $40.0 million of operating lease liabilities and related right-of-use assets at January 1, 2019, with any difference between these amounts, net of the deferred tax impact, recorded as an adjustment to opening retained earnings. These estimates, based on our active lease portfolio, may change as the Corporation continues through the implementation process, or due to changes in the lease portfolio, which could include new leases, changes in lease commencement dates, and changes to renewal options and lease termination expectations. The initial and continued impact of the recording of operating lease assets will have a negative impact on all Corporation and Bank capital ratios under current regulatory guidance and possibly equity ratios.

11


Note 2. Earnings per Share
The Corporation uses the two-class method to calculate earnings per share as the unvested restricted stock issued under the Corporation's equity incentive plans are participating shares with nonforfeitable rights to dividends. Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the number of weighted average shares outstanding during the period. The table also notes anti-dilutive options which are those options with weighted average exercise prices in excess of the weighted average market value for the periods presented.
The following table sets forth the computation of basic and diluted earnings per share:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(Dollars and shares in thousands, except per share data)
2018
 
2017
 
2018
 
2017
Numerator:
 
 
 
 
 
 
 
Net income
$
14,964

 
$
11,196

 
$
32,171

 
$
33,830

Net income allocated to unvested restricted stock
(86
)
 
(96
)
 
(225
)
 
(330
)
Net income allocated to common shares
$
14,878

 
$
11,100

 
$
31,946

 
$
33,500

Denominator:
 
 
 
 
 
 
 
Weighted average shares outstanding
29,402

 
26,666

 
29,387

 
26,653

Average unvested restricted stock
(170
)
 
(229
)
 
(204
)
 
(265
)
Denominator for basic earnings per share—weighted-average shares outstanding
29,232

 
26,437

 
29,183

 
26,388

Effect of dilutive securities—employee stock options
86

 
105

 
92

 
102

Denominator for diluted earnings per share—adjusted weighted-average shares outstanding
29,318

 
26,542

 
29,275

 
26,490

Basic earnings per share
$
0.51

 
$
0.42

 
$
1.10

 
$
1.27

Diluted earnings per share
$
0.51

 
$
0.42

 
$
1.09

 
$
1.27

Average anti-dilutive options excluded from computation of diluted earnings per share
359

 
185

 
315

 
166



12


Note 3. Investment Securities
The following table shows the amortized cost and the estimated fair value of the held-to-maturity securities and available-for-sale securities at September 30, 2018 and December 31, 2017, by contractual maturity within each type:
 
At September 30, 2018
 
At December 31, 2017
(Dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Securities Held-to-Maturity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government corporations and agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
After 1 year to 5 years
$
6,996

 
$

 
$
(214
)
 
$
6,782

 
$
6,995

 
$

 
$
(77
)
 
$
6,918

 
6,996

 

 
(214
)
 
6,782

 
6,995

 

 
(77
)
 
6,918

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
After 5 years to 10 years
12,190

 

 
(279
)
 
11,911

 
8,944

 

 
(51
)
 
8,893

Over 10 years
88,956

 

 
(2,007
)
 
86,949

 
39,625

 
44

 
(160
)
 
39,509

 
101,146

 

 
(2,286
)
 
98,860

 
48,569

 
44

 
(211
)
 
48,402

Total
$
108,142

 
$

 
$
(2,500
)
 
$
105,642

 
$
55,564

 
$
44

 
$
(288
)
 
$
55,320

Securities Available-for-Sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government corporations and agencies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Within 1 year
$
15,153

 
$

 
$
(131
)
 
$
15,022

 
$
1,499

 
$

 
$
(3
)
 
$
1,496

After 1 year to 5 years
303

 

 
(9
)
 
294

 
15,590

 

 
(125
)
 
15,465


15,456

 

 
(140
)
 
15,316

 
17,089

 

 
(128
)
 
16,961

State and political subdivisions:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Within 1 year
5,943

 

 
(11
)
 
5,932

 
2,721

 
1

 
(6
)
 
2,716

After 1 year to 5 years
12,569

 
15

 
(97
)
 
12,487

 
16,787

 
33

 
(44
)
 
16,776

After 5 years to 10 years
46,803

 
303

 
(631
)
 
46,475

 
54,846

 
897

 
(73
)
 
55,670

Over 10 years
3,120

 

 
(122
)
 
2,998

 
3,120

 
15

 

 
3,135


68,435

 
318

 
(861
)
 
67,892

 
77,474

 
946

 
(123
)
 
78,297

Residential mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
After 1 year to 5 years
4,887

 

 
(102
)
 
4,785

 
3,913

 
12

 
(26
)
 
3,899

After 5 years to 10 years
53,041

 
6

 
(2,231
)
 
50,816

 
51,428

 
5

 
(852
)
 
50,581

Over 10 years
105,808

 
22

 
(5,017
)
 
100,813

 
133,237

 
87

 
(2,383
)
 
130,941


163,736

 
28

 
(7,350
)
 
156,414

 
188,578

 
104

 
(3,261
)
 
185,421

Collateralized mortgage obligations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
After 5 years to 10 years
1,772

 

 
(108
)
 
1,664

 
2,103

 

 
(82
)
 
2,021

Over 10 years
1,347

 

 
(30
)
 
1,317

 
1,567

 
14

 

 
1,581


3,119

 

 
(138
)
 
2,981

 
3,670

 
14

 
(82
)
 
3,602

Corporate bonds:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Within 1 year
2,506

 

 
(10
)
 
2,496

 
10,006

 

 
(5
)
 
10,001

After 1 year to 5 years
23,824

 
21

 
(442
)
 
23,403

 
24,885

 
20

 
(147
)
 
24,758

After 5 years to 10 years
16,152

 
2

 
(537
)
 
15,617

 
16,669

 
71

 
(296
)
 
16,444

Over 10 years
60,000

 

 
(7,186
)
 
52,814

 
60,000

 

 
(4,027
)
 
55,973


102,482

 
23

 
(8,175
)
 
94,330

 
111,560

 
91

 
(4,475
)
 
107,176

Equity securities:*
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
No stated maturity
N/A

 
N/A

 
N/A

 
N/A

 
6,395

 
667

 
(1
)
 
7,061


N/A

 
N/A

 
N/A

 
N/A

 
6,395

 
667

 
(1
)
 
7,061

Total
$
353,228

 
$
369

 
$
(16,664
)
 
$
336,933

 
$
404,766

 
$
1,822

 
$
(8,070
)
 
$
398,518

* Equity securities at December 31, 2017 include $6.0 million of money market mutual funds and $1.1 million of financial services equity securities. In accordance with ASU 2016-01, beginning January 1, 2018, such amounts were reclassified from investment securities available-for-sale to investments in equity securities on the Corporation's Condensed Consolidated Balance Sheets.

Expected maturities may differ from contractual maturities because debt issuers may have the right to call or prepay obligations without call or prepayment penalties and mortgage-backed securities typically prepay at a rate faster than contractually due.

13


Securities with a carrying value of $362.0 million and $345.1 million at September 30, 2018 and December 31, 2017, respectively, were pledged to secure public deposits and other contractual obligations. In addition, securities of $295 thousand and $1.8 million were pledged to secure credit derivatives and interest rate swaps at September 30, 2018 and December 31, 2017, respectively. See Note 11, "Derivative Instruments and Hedging Activities" for additional information.
The following table presents information related to sales of securities available-for-sale during the nine months ended September 30, 2018 and 2017:
 
Nine Months Ended September 30,
(Dollars in thousands)
2018
 
2017
Securities available-for-sale:
 
 
 
Proceeds from sales
$
1,010

 
$
3,538

Gross realized gains on sales
10

 
43

Tax expense related to net realized gains on sales
2

 
15

    
At September 30, 2018 and December 31, 2017, there were no investments in any single non-federal issuer representing more than 10% of shareholders’ equity.
The following table shows the fair value of securities that were in an unrealized loss position at September 30, 2018 and December 31, 2017 by the length of time those securities were in a continuous loss position. For the investment securities in an unrealized loss position, the Corporation has concluded, based on its analysis, that the unrealized losses are primarily caused by the movement of interest rates and current market conditions. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the par value of the investment. It is more likely than not that the Corporation will not be required to sell the investments before a recovery of carrying value.
 
Less than
Twelve Months
 
Twelve Months
or Longer
 
Total
(Dollars in thousands)
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
 
Fair Value
 
Unrealized
Losses
At September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Securities Held-to-Maturity
 
 
 
 
 
 
 
 
 
 
 
U.S. government corporations and agencies
$

 
$

 
$
6,782

 
$
(214
)
 
$
6,782

 
$
(214
)
Residential mortgage-backed securities
89,833

 
(1,963
)
 
9,027

 
(323
)
 
98,860

 
(2,286
)
Total
$
89,833

 
$
(1,963
)
 
$
15,809

 
$
(537
)
 
$
105,642

 
$
(2,500
)
Securities Available-for-Sale
 
 
 
 
 
 
 
 
 
 
 
U.S. government corporations and agencies
$

 
$

 
$
15,316

 
$
(140
)
 
$
15,316

 
$
(140
)
State and political subdivisions
33,509

 
(777
)
 
7,476

 
(84
)
 
40,985

 
(861
)
Residential mortgage-backed securities
27,331

 
(972
)
 
127,441

 
(6,378
)
 
154,772

 
(7,350
)
Collateralized mortgage obligations
1,317

 
(30
)
 
1,664

 
(108
)
 
2,981

 
(138
)
Corporate bonds
21,162

 
(467
)
 
69,644

 
(7,708
)
 
90,806

 
(8,175
)
Total
$
83,319

 
$
(2,246
)
 
$
221,541

 
$
(14,418
)
 
$
304,860

 
$
(16,664
)
At December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Securities Held-to-Maturity
 
 
 
 
 
 
 
 
 
 
 
U.S. government corporations and agencies
$
6,919

 
$
(77
)
 
$

 
$

 
$
6,919

 
$
(77
)
Residential mortgage-backed securities
40,881

 
(211
)
 

 

 
40,881

 
(211
)
Total
$
47,800

 
$
(288
)
 
$

 
$

 
$
47,800

 
$
(288
)
Securities Available-for-Sale
 
 
 
 
 
 
 
 
 
 
 
U.S. government corporations and agencies
$
5,213

 
$
(38
)
 
$
11,749

 
$
(90
)
 
$
16,962

 
$
(128
)
State and political subdivisions
18,457

 
(91
)
 
6,332

 
(32
)
 
24,789

 
(123
)
Residential mortgage-backed securities
32,217

 
(210
)
 
141,371

 
(3,051
)
 
173,588

 
(3,261
)
Collateralized mortgage obligations

 

 
2,021

 
(82
)
 
2,021

 
(82
)
Corporate bonds
18,464

 
(1,016
)
 
71,957

 
(3,459
)
 
90,421