What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-04 compared with 2022-08-05 · 139 added, 140 removed, 373 unchanged (43% of the section changed)

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This guidance is effective as of March 12, 2020 through December 31, 2022.

We are currently in the process of evaluating the amendments and determining the impact on our financial statements.

In January 2021, the FASB issued ASU No.

2021-01, “Reference Rate Reform.” This ASU provides amendments, which are elective, and apply to all entities that have derivative instruments that use an interest rate for margining, discounting or contract price alignment of certain derivative instruments that are modified as a result of the reference rate reform.

This guidance is effective as of the date of issuance through December 31, 2022.

We are currently in the process of evaluating the amendments and determining the impact on our financial statements.

We established a cross-functional working group to manage the LIBOR transition.

A transition plan was created to identify and modify the Company’s loan and other financial instrument contracts that are impacted by LIBOR transition.

The Company chose the Secured Overnight Financing Rate (“SOFR”) as its alternative replacement for LIBOR on both back-to-back swaps and variable rate loans.

We have not offered LIBOR for any new contracts since December 31, 2021.

We are continuing to evaluate the amendments on our financial statements, with no material impacts expected, and execute on our transition plan.

In March 2022, the FASB issued ASU No.

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Comparison of Financial Condition

Total assets at June 30, 2022 were $14.155 billion, a decrease of $346.8 million, or 2.4%, from $14.502 billion at December 31, 2021.

This decrease in assets was due to a decrease in total cash and cash equivalents as well as a decrease in marketable securities, partially offset by an increase in loans receivable, as described in further detail below.

Total cash and cash equivalents decreased by $774.7 million, or 60.6%, to $504.5 million at June 30, 2022 from $1.279 billion at December 31, 2021.

This decrease was driven by organic loan growth, described in further detail below, as well as the purchase of two small business equipment finance loan pools totaling $115.8 million and two one-to four-family jumbo mortgage loan packages totaling $188.3 million during the six months ended June 30, 2022.

Total marketable securities decreased by $28.8 million, or 1.2%, to $2.288 billion at June 30, 2022 from $2.317 billion at December 31, 2021.

Total assets at September 30, 2022 were $13.953 billion, a decrease of $548.4 million, or 3.8%, from $14.502 billion at December 31, 2021.

This decrease in assets was due to decreases in total cash and cash equivalents and marketable securities, partially offset by an increase in loans receivable, as described in further detail below.

Total cash and cash equivalents decreased by $1.161 billion, or 90.7%, to $118.5 million at September 30, 2022 from $1.279 billion at December 31, 2021.

This decrease was driven by organic loan growth and deposit outflow, described in further detail below, as well as the purchase of three small business equipment finance loan pools totaling $182.8 million and two one-to four-family jumbo mortgage loan packages totaling $188.3 million during the nine months ended September 30, 2022.

Total marketable securities decreased by $165.5 million, or 7.1%, to $2.151 billion at September 30, 2022 from $2.317 billion at December 31, 2021.

This decrease was driven primarily by the rising interest rate environment which negatively impacted the fair market value of our available-for-sale portfolio.

Total loans receivable increased by $416.4 million, or 4.2%, to $10.433 billion at June 30, 2022, from $10.016 billion at December 31, 2021.

This increase was due to organic loan growth as well as the purchases of the small business equipment finance and one-to- four-family jumbo mortgage loan pools during the year.

Our personal loan banking portfolio increased by $416.5 million, or 6.8%, to $6.570 billion at June 30, 2022, from $6.153 billion at December 31, 2021.

In addition, continued growth in our consumer indirect auto loans and lower sales of residential mortgages into the secondary market contributed to the increase in total loans receivable.

Total deposits decreased by $233.9 million, or 1.9%, to $12.067 billion at June 30, 2022 from $12.301 billion at December 31, 2021.

Additionally, the maturity and monthly cash flow of marketable securities was redeployed into higher interest-earning loan products.

Total loans receivable increased by $725.1 million, or 7.2%, to $10.742 billion at September 30, 2022, from $10.016 billion at December 31, 2021.

This increase was due to organic loan growth as well as the purchases of small business equipment finance and one-to- four-family jumbo mortgage loan pools during the year.

Our personal loan portfolio increased by $649.8 million, or 10.6%, to $6.803 billion at September 30, 2022, from $6.153 billion at December 31, 2021.

Continued growth in our consumer indirect auto loans and fewer sales of residential mortgages into the secondary market contributed to the increase in total loans receivable.

Total deposits decreased by $422.8 million, or 3.4%, to $11.878 billion at September 30, 2022 from $12.301 billion at December 31, 2021.

This decrease was primarily due to decreases in time and demand deposit accounts of $393.6 million, or 5.3%.

We believe these decreases were primarily the result of customer spending activity returning to pre-pandemic levels at a time when inflationary pressures have caused higher prices and government stimulus programs have ended.

Total shareholders’ equity at June 30, 2022 was $1.495 billion, or $11.78 per share, a decrease of $89.0 million, or 5.6%, from $1.584 billion, or $12.51 per share, at December 31, 2021.

This decrease was primarily the result of an increase in accumulated other comprehensive loss of $105.0 million due to an increase in unrealized losses in the available-for-sale investment portfolio due to rising interest rates, as well as a payment of cash dividends of $50.7 million for the six months ended June 30, 2022.

These decreases were partially offset by year-to-date earnings of $61.7 million.

Total shareholders’ equity at September 30, 2022 was $1.460 billion, or $11.50 per share, a decrease of $123.8 million, or 7.8%, from $1.584 billion, or $12.51 per share, at December 31, 2021.

This decrease was primarily the result of an increase in accumulated other comprehensive loss of $153.5 million due to an increase in unrealized losses in the available-for-sale investment portfolio as a result of rising interest rates.

These decreases were partially offset by year-to-date earnings of $99.0 million, net of $76.1 million of cash dividend payments.

Regulatory Capital

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Capital requirements are presented in the tables below (in thousands).

At June 30, 2022

At September 30, 2022

Actual Minimum capital requirements (1) Well capitalized requirements

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Northwest monitors its liquidity position primarily using the ratio of unencumbered available-for-sale liquid assets as a percentage of deposits and borrowings (“liquidity ratio”).

Northwest Bank’s liquidity ratio at June 30, 2022 was 13.6%.

Northwest Bank’s liquidity ratio at September 30, 2022 was 9.74%.

We adjust liquidity levels in order to meet funding needs for deposit outflows, payment of real estate taxes and insurance on mortgage loan escrow accounts, repayment of borrowings and loan commitments.

At June 30, 2022, Northwest had $3.582 billion of additional borrowing capacity available with the FHLB, including $250.0 million on an overnight line of credit which had no balance at June 30, 2022, as well as $91.2 million of borrowing capacity available with the Federal Reserve Bank and $110.0 million with three correspondent banks.

We paid $25.4 million and $25.5 million in cash dividends during the quarters ended June 30, 2022 and 2021, respectively.

The common stock dividend payout ratio (dividends declared per share divided by net income per diluted share) was 76.9% and 52.6% for the quarters ended June 30, 2022 and June 30, 2021, respectively, on dividends of $0.20 per share for the quarters ended June 30, 2022 and June 30, 2021.

On July 20, 2022, the Board of Directors declared a cash dividend of $0.20 per share payable on August 15, 2022 to shareholders of record as of August 4, 2022.

At September 30, 2022, Northwest had $3.502 billion of additional borrowing capacity available with the FHLB, including $250.0 million on an overnight line of credit which had a balance of $11.9 million at September 30, 2022, as well as $98.9 million of borrowing capacity available with the Federal Reserve Bank and $105.0 million with two correspondent banks.

We paid $25.4 million in cash dividends during the quarters ended September 30, 2022 and 2021.

The common stock dividend payout ratio (dividends declared per share divided by net income per diluted share) was 69.0% and 74.1% for the quarters ended September 30, 2022 and September 30, 2021, respectively, on dividends of $0.20 per share.

On O ctober 24, 2022, the Board of Directors declared a cash dividend of $0.20 per share payable on November 14, 2022 to shareholders of record as of November 3, 2022.

This represents the 112 th consecutive quarter we have paid a cash dividend.

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Foreclosed property is carried at the lower of its fair value less estimated costs to sell or the principal balance of the related loan.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands)

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We utilize a structured methodology each period when analyzing the adequacy of the allowance for credit losses and the related provision for credit losses, which the ACL Committee assesses regularly for appropriateness.

As part of the analysis as of June 30, 2022, we considered the most recent economic conditions and forecasts available which incorporated the impact of material recent economic events.

As part of the analysis as of September 30, 2022, we considered the most recent economic conditions and forecasts available which incorporated the impact of material recent economic events.

In addition, we considered the overall trends in asset quality, reserves on individually assessed loans, historical loss rates and collateral valuations.

The ACL decreased by $3.9 million, or 3.8%, to $98.4 million, or 0.94% of total loans at June 30, 2022 from $102.2 million, or 1.02% of total loans, at December 31, 2021.

Total classified loans decreased $85.8 million, or 23.6%, to $277.4 million at June 30, 2022 from $363.2 million at December 31, 2021.

The ACL increased by $7.6 million, or 7.4%, to $109.8 million, or 1.02% of total loans at September 30, 2022 from $102.2 million, or 1.02% of total loans, at December 31, 2021.

Total classified loans decreased $125.4 million, or 34.5%, to $237.7 million at September 30, 2022 from $363.2 million at December 31, 2021.

This decrease was primarily due to the upgrade and payoff of loans in our commercial real estate portfolio during the current year.

We also consider how the levels of nonaccrual loans and historical charge-offs have influenced the required amount of allowance for credit losses.

Nonaccrual loans of $98.4 million, or 0.94% of total loans receivable at June 30, 2022, decreased by $60.1 million, or 37.9%, from $158.5 million, or 1.59% of total loans receivable at December 31, 2021.

Nonaccrual loans of $83.6 million, or 0.78% of total loans receivable at September 30, 2022, decreased by $74.8 million, or 47.2%, from $158.5 million, or 1.59% of total loans receivable at December 31, 2021.

This decrease was primarily related to upgrades to loans within our commercial real estate portfolio.

As a percentage of average loans, annualized net charge-offs decreased to 0.14% for the quarter ended June 30, 2022 compared to 0.20% for the year ended December 31, 2021.

Comparison of Operating Results for the Quarters Ended June 30, 2022 and 2021

Net income for the quarter ended June 30, 2022 was $33.4 million, or $0.26 per diluted share, a decrease of $15.5 million, or 31.7%, from net income of $49.0 million, or $0.38 per diluted share, for the quarter ended June 30, 2021.

The decrease in net income

primarily resulted from a decrease in noninterest income of $24.3 million, or 44.3% and an increase in the provision for credit losses of $2.6 million.

Partially offsetting these changes was a $4.5 million, or 4.7%, increase in net interest income, a decrease in noninterest expense of $1.5 million, or 1.8%, as well as a $5.3 million, or 34.9%, decrease in income tax expense.

Net income for the quarter ended June 30, 2022 represents annualized returns on average equity and average assets of 8.90% and 0.94%, respectively, compared to 12.58% and 1.37% for the same quarter last year.

We experienced an annualized net recovery during the quarter ended September 30, 2022 of 0.14%, as a percentage of average loans, compared to a total net charge-off 0.20% as a percentage of average loans for the year ended December 31, 2021.

The net recovery was primarily from the recovery of a previously charged-off commercial real estate loan.

Comparison of Operating Results for the Quarters Ended September 30, 2022 and 2021

Net income for the quarter ended September 30, 2022 was $37.3 million, or $0.29 per diluted share, an increase of $2.2 million, or 6.4%, from net income of $35.1 million, or $0.27 per diluted share, for the quarter ended September 30, 2021.

The increase in net income primarily resulted from a $14.3 million, or 14.6%, increase in net interest income, as well as a decrease in noninterest expense of $3.5 million, or 4.1%.

These increases were partially offset by an increase in the provision for credit losses of $12.0 million, or 276.6%, a decrease in noninterest income of $2.4 million, or 8.2%, and a $1.2 million, or 11.0%, increase in income tax expense.

Net income for the quarter ended September 30, 2022 represents annualized returns on average equity and average assets of 9.84% and 1.05%, respectively, compared to 8.86% and 0.97% for the same quarter last year.

A further discussion of notable changes follows.

Interest Income

Total interest income increased $3.3 million, or 3.3%, to $105.9 million for the quarter ended June 30, 2022 from $102.6 million for the quarter ended June 30, 2021.

This increase was due to an increase in the average balance of interest-earning assets of $94.9 million, or 0.7%, to $13.347 billion for the quarter ended June 30, 2022 from $13.252 billion for the quarter ended June 30, 2021, which was primarily driven by growth in the mortgage-backed securities portfolio and interest-earning deposits.

Additionally, the average yield earned on interest-earning assets increased to 3.18% for the quarter ended June 30, 2022 from 3.10% for the quarter ended June 30, 2021 due to the rising interest rate environment.

Interest income on loans receivable increased by $319,000, or 0.3%, to $95.6 million for the quarter ended June 30, 2022 compared to $95.3 million for the quarter ended June 30, 2021.

This increase in interest income was due to an increase in the average yield on loans receivable, to 3.77% for the quarter ended June 30, 2022 , from 3.71% from the quarter ended June 30, 2021 , due to the increase in market interest rates.

Partially offsetting this increase in yield was a decrease in the average balance of loans receivable by $139.5 million, or 1.4%, to $10.158 billion for the quarter ended June 30, 2022 from $10.297 billion for the quarter ended June 30, 2021 due primarily to $252.4 million of PPP loan forgiveness since June 30 of last year.

Interest income on mortgage-backed securities increased by $1.5 million, or 26.0%, to $7.2 million for the quarter ended June 30, 2022 compared to $5.7 million for the quarter ended June 30, 2021.

This increase was driven by an increase in the average balance of mortgage-backed securities of $196.1 million, or 11.2%, to $1.952 billion for the quarter ended June 30, 2022 from $1.756 billion for the quarter ended June 30, 2021.

This increase in average balance was primarily a result of additional purchases utilizing excess cash from deposit growth during the past year.

The average yield on mortgage-backed securities increased to 1.47% for the quarter ended June 30, 2022 from 1.29% for the quarter ended June 30, 2021 due to the purchase of mortgage-backed securities with yields higher than the existing portfolio.

Interest income on investment securities increased by $111,000, or 8.6%, for the quarter ended June 30, 2022 to $1.4 million from $1.3 million for the quarter ended June 30, 2021.

This increase was due to an increase in the average balance of investment securities by $12.5 million, or 3.4%, to $376.9 million for the quarter ended June 30, 2022 from $364.4 million for the quarter ended June 30, 2021.

The average yield on investment securities increased to 1.48% for the quarter ended June 30, 2022 from 1.41% for the quarter ended June 30, 2021.

Dividends on FHLB stock decreased by $56,000, or 40.6%, to $82,000 for the quarter ended June 30, 2022 from $138,000 for the quarter ended June 30, 2021.

This decrease was due to the decrease in the average balance of FHLB stock by $9.7 million, or 41.9%, to $13.4 million for the quarter ended June 30, 2022 from $23.1 million for the quarter ended June 30, 2021.

Total interest income increased $13.6 million, or 13.0%, to $118.6 million for the quarter ended September 30, 2022 from $105.0 million for the quarter ended September 30, 2021.

This increase was due to an increase in the average yield earned on interest-earning assets to 3.58% for the quarter ended September 30, 2022 from 3.13% for the quarter ended September 30, 2021 due to the rising interest rate environment, as well as the change in our interest-earning asset mix.

This was partially offset by a decline in the average balance of interest-earning assets of $177.9 million, or 1.3%, to $13.156 billion for the quarter ended September 30, 2022 from $13.334 billion for the quarter ended September 30, 2021, driven by a decrease in other interest-earning deposits.

Interest income on loans receivable increased by $9.5 million, or 9.7%, to $106.9 million for the quarter ended September 30, 2022 compared to $97.5 million for the quarter ended September 30, 2021.

This increase in interest income was due to increases in both the average yield and average balance on loans receivable.

The average yield increased to 4.05% for the quarter ended September 30, 2022 , from 3.79% from the quarter ended September 30, 2021 , due to the increase in market interest rates.

The average balance of loans receivable increased by $254.6 million, or 2.5%, to $10.481 billion for the quarter ended September 30, 2022 from $10.226 billion for the quarter ended September 30, 2021 due to organic loan growth as well as the purchases of three small business equipment finance loan pools totaling $182.8 million and two one-to four-family jumbo mortgage loan packages totaling $188.3 million during the nine months ended September 30, 2022 .

Interest income on mortgage-backed securities increased by $2.8 million, or 48.7%, to $8.7 million for the quarter ended September 30, 2022 compared to $5.8 million for the quarter ended September 30, 2021.

This increase was driven by an increase in the average yield on mortgage-backed securities to 1.72% for the quarter ended September 30, 2022 from 1.27% for the quarter ended September 30, 2021 due to the purchase of mortgage-backed securities with yields higher than the existing portfolio.

Additionally, the average balance of mortgage-backed securities increased $186.8 million, or 10.2%, to $2.020 billion for the quarter ended September 30, 2022 from $1.833 billion for the quarter ended September 30, 2021.

This increase in average balance was primarily a result of additional purchases as we deployed interest-earning deposits into higher yielding investments.

Interest income on investment securities increased by $270,000, or 21.1%, for the quarter ended September 30, 2022 to $1.5 million from $1.3 million for the quarter ended September 30, 2021.

This increase was due to an increase in the average balance of investment securities by $40.1 million, or 11.5%, to $388.8 million for the quarter ended September 30, 2022 from $348.6 million for the quarter ended September 30, 2021.

The average yield on investment securities increased to 1.59% for the quarter ended September 30, 2022 from 1.47% for the quarter ended September 30, 2021.

Dividends on FHLB stock increased by $77,000, or 108.5%, to $148,000 for the quarter ended September 30, 2022 from $71,000 for the quarter ended September 30, 2021.

This increase was due to the average yield increasing to 4.19% for the quarter ended September 30, 2022 from 1.31% for the quarter ended September 30, 2021 due to increases in market interest rates.

This was partially offset by a decrease in the average balance of FHLB stock of $7.6 million, or 35.1%, to $14.0 million for the quarter ended September 30, 2022 from $21.6 million for the quarter ended September 30, 2021.

Required FHLB stock holdings fluctuate with, among other things, the utilization of our borrowing capacity as well as capital requirements established by the FHLB.

The average yield increased slightly to 2.44% for the quarter ended June 30, 2022 from 2.40% for the quarter ended June 30, 2021.

Interest income on interest-earning deposits increased by $1.5 million to $1.7 million for the quarter ended June 30, 2022 from $192,000 for the quarter ended June 30, 2021.

This increase was driven by an increase in the average yield on interest-earning deposits to 0.79% for the quarter ended June 30, 2022 from 0.09% for the quarter ended June 30, 2021, due to the Federal Reserve Board raising targeted short-term interest rates.

Additionally, the average balance of interest-earning deposits increased by $35.4 million, or 4.4%, to $846.1 million for the quarter ended June 30, 2022 from $810.7 million for the quarter ended June 30, 2021.

Interest income on interest-earning deposits increased by $943,000 to $1.3 million for the quarter ended September 30, 2022 from $352,000 for the quarter ended September 30, 2021.

This increase was driven by an increase in the average yield on interest-earning deposits to 2.00% for the quarter ended September 30, 2022 from 0.15% for the quarter ended September 30, 2021, due to the Federal Reserve Board raising targeted short-term interest rates.

The average balance of interest-earning deposits decreased by $651.9 million, or 72.0%, to $253.2 million for the quarter ended September 30, 2022 from $905.1 million for the quarter ended September 30, 2021 as the Bank has deployed these funds into higher yielding loans and investments.

Interest Expense

Interest expense decreased by $1.2 million, or 17.5%, to $5.6 million for the quarter ended June 30, 2022 from $6.8 million for the quarter ended June 30, 2021.

This decrease in interest expense was primarily due to the decline in the the average cost of interest-bearing liabilities, which decreased to 0.24% for the quarter ended June 30, 2022 from 0.29% for the quarter ended June 30, 2021.

This decrease resulted primarily from the decrease in the interest rate paid on deposit accounts in response to decreases in market interest rates as well as the overall change in the mix of deposit accounts as customers move from time deposits to more liquid accounts.

Additionally, the average balance of interest-bearing liabilities decreased by $45.7 million, or 0.5%, to $9.466 billion for the quarter ended June 30, 2022 from $9.512 billion for the quarter ended June 30, 2021.

Interest expense decreased by $729,000, or 11.1%, to $5.9 million for the quarter ended September 30, 2022 from $6.6 million for the quarter ended September 30, 2021.

This decrease in interest expense was primarily due to the decrease in the average

balance of interest-bearing deposits of $287.8 million, or 3.0%, to $9.246 billion for the quarter ended September 30, 2022 from $9.534 billion for the quarter ended September 30, 2021.

Additionally, there was a decline in the average cost of interest-bearing liabilities, which decreased to 0.25% for the quarter ended September 30, 2022 from 0.27% for the quarter ended September 30, 2021.

This decrease resulted from the overall change in the mix of deposit accounts as customers move from fixed-rate time deposits to more liquid deposit accounts.

In addition, d espite a rising interest rate environment, we have been able to keep our cost of deposits stable.

Net Interest Income

Net interest income increased by $4.5 million, or 4.7%, to $100.3 million for the quarter ended June 30, 2022 from $95.7 million for the quarter ended June 30, 2021.

Net interest income increased by $14.3 million, or 14.6%, to $112.7 million for the quarter ended September 30, 2022 from $98.4 million for the quarter ended September 30, 2021.

This increase is attributable to the factors discussed above.

Additionally, our interest rate spread increased to 2.94% for the quarter ended June 30, 2022 from 2.82% for the quarter ended June 30, 2021, and our net interest margin increased to 3.05% for the quarter ended June 30, 2022 from 2.89% for the quarter ended June 30, 2021, primarily due to rising interest-earning asset yields in response to recent increases in market interest rates.

Additionally, our interest rate spread increased to 3.33% for the quarter ended September 30, 2022 from 2.86% for the quarter ended September 30, 2021, and our net interest margin increased to 3.40% for the quarter ended September 30, 2022 from 2.95% for the quarter ended September 30, 2021, primarily due to rising interest-earning asset yields in response to recent increases in market interest rates.

Provision for Credit Losses

The Company recorded a provision expense of $2.6 million for the quarter ended June 30, 2022 compared to no provision for credit losses during the quarter ended June 30, 2021.

The current period provision was driven by loan portfolio growth and the slower economic growth forecasts by Moodys.

T he lack of provision in the prior year was driven by the improvements in the economic forecasts compared to the uncertainty that existed in 2020 to the industries impacted by COVID-19.

In determining the amount of the current period provision, we considered current and forecasted economic conditions, including but not limited unemployment levels, expected economic growth, bankruptcy filings, and changes in real estate values and the impact of these factors on the quality of our loan portfolio and historical loss experience.

The provision for credit losses increased by $12.0 million, or 276.6%, to a current period provision expense of $7.7 million for the quarter ended September 30, 2022 from a negative provision of $4.4 million the quarter ended September 30, 2021.

The current period provision was driven by loan portfolio growth during the current year as well as a deterioration in the economic forecasts utilized in our allowance for credit loss models.

The credit to the provision in the prior year was driven by improvements in the economic forecasts compared to the uncertainty that existed in 2020 to the industries impacted by COVID-19.

In determining the amount of the current period provision, we considered current and forecasted economic conditions, including but not limited to unemployment levels, expected economic growth, bankruptcy filings, and changes in real estate values and the impact of these factors on the quality of our loan portfolio and historical loss experience.

We analyze the allowance for credit losses as described in the section entitled “ Allowance for Credit Losses.

” The provision that is recorded is sufficient, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at June 30, 2022.

Noninterest Income

Noninterest income decreased by $24.3 million, or 44.3%, to $30.4 million for the quarter ended June 30, 2022 from $54.7 million for the quarter ended June 30, 2021.

This decrease was primarily driven by the sale of the insurance business during the quarter ended June 30, 2021, resulting in a $25.3 million pre-tax gain.

As a result of this sale, insurance commission income ceased during the second quarter last year resulting in a decrease of $1.0 million for the quarter ended June 30, 2022.

Also contributing to the decrease in noninterest income was a decrease in mortgage banking income of $1.7 million, or 43.4%, to $2.2 million for the quarter ended June 30, 2022 from $3.8 million for the quarter ended June 30, 2021 due to t he impact of less favorable pricing in the secondary market, as a result of the recent volatile interest rate environment.

Partially offsetting these decreases was an increase in other operating income of $2.2 million, or 83.6%, to $4.9 million for the quarter ended June 30, 2022 compared to $2.6 million for the quarter ended June 30, 2021.

This increase was driven by an increase in interest rate swap income as well as a gain of approximately $1.0 million from the sale of branch buildings associated with the previously announced consolidation of 20 branch office facilities.

S ervice charges and fees increased $929,000, or 7.3%, to $13.7 million for the quarter ended June 30, 2022 compared to $12.7 million for the quarter ended June 30, 2021, as customer activity increased in 2022 after COVID-19 restricted behavior in the prior year.

Noninterest income decreased by $2.4 million, or 8.2%, to $26.8 million for the quarter ended September 30, 2022 from $29.2 million for the quarter ended September 30, 2021.

This decrease was primarily due to a decline in our mortgage banking income of $3.2 million, or 80.6%, to $766,000 for the quarter ended September 30, 2022 from $3.9 million for the quarter ended September 30, 2021.

This decrease reflects the impact of less favorable pricing in the secondary market, due primarily to the volatile interest rate environment, as well as decreased mortgage volumes.

Partially offsetting this decrease was an increase in service charges and fees of $1.1 million, or 8.5%, to $14.3 million for the quarter ended September 30, 2022 compared to $13.2 million for the quarter ended September 30, 2021, as customer activity increased in 2022 after COVID-19 restricted behavior in the prior year.

Noninterest Expense

Noninterest expense decreased by $1.5 million, or 1.8%, to $84.8 million for the quarter ended June 30, 2022 from $86.3 million for the quarter ended June 30, 2021.

This decrease was due to a decline in a majority of the noninterest expense categories as we continue to emphasize efficiency initiatives.

Processing expenses decreased $2.2 million, or 14.5%, to $12.9 million for the quarter ended June 30, 2022 from $15.2 million for the quarter ended June 30, 2021 due to the investment in our technology and infrastructure during the prior year.

Professional services decreased $898,000, or 21.2%, to $3.3 million for the quarter ended June 30, 2022 from $4.2 million for the quarter ended June 30, 2021 due to the use of third-party experts to assist with our digital strategy rollout in the prior year.

Compensation and employee benefits decreased $821,000 to $48.1 million for the quarter ended June 30, 2022 from $48.9 million for the quarter ended June 30, 2021, despite recognizing approximately $1.4 million of additional expense related to the acceleration of compensation and stock benefits upon Mr.

Seiffert's passing.

The decrease in compensation and employee benefits was driven primarily by the branch consolidations completed in April.

Offsetting these decreases was an increase in other expenses of $3.8 million to $5.2 million for the quarter ended June 30, 2022 from $1.4 million for the quarter ended June 30, 2021 due to an increase in our unfunded loan loss reserve associated with the origination of loans with current off balance sheet exposure.

The provision for income taxes decreased by $5.3 million, or 34.9%, to $9.9 million for the quarter ended June 30, 2022 from $15.1 million for the quarter ended June 30, 2021.

This decrease in income taxes was due to a decrease in income before taxes in the current year.

Noninterest expense decreased by $3.5 million, or 4.1%, to $82.6 million for the quarter ended September 30, 2022 from $86.1 million for the quarter ended September 30, 2021.

Almost all expense categories decreased as the Company continues to focus on controlling costs and improving efficiency.

Compensation and employee benefits decreased $2.4 million, or 4.8%, to $46.7 million for the quarter ended September 30, 2022 from $49.1 million for the quarter ended September 30, 2021, driven primarily by the branch consolidations completed in April 2022.

Professional services decreased $932,000, or 21.7%, to $3.4 million for the quarter ended September 30, 2022 from $4.3 million for the quarter ended September 30, 2021 due to the use of third-party consulting services during the prior year.

Offsetting these decreases was an increase in other expenses of $1.7 million, or 75.4%, to $3.9 million for the quarter ended September 30, 2022 from $2.2 million for the quarter ended September 30, 2021 due to an increase in our unfunded loan loss reserve associated with the origination of loans with current off balance sheet exposure.

The provision for income taxes increased by $1.2 million, or 11.0%, to $12.0 million for the quarter ended September 30, 2022 from $10.8 million for the quarter ended September 30, 2021.

This increase in income taxes was due to an increase in income before taxes in the current year.

We anticipate our effective tax rate to be between 22.0% and 24.0% for the year ending December 31, 2022.

Comparison of Operating Results for the Six Months Ended June 30, 2022 and 2021

Net income for the six months ended June 30, 2022 was $61.7 million, or $0.49 per diluted share, a decrease of $27.5 million, or 30.8%, from $89.2 million, or $0.70 per diluted share, for the six months ended June 30, 2021.

The decrease in net income resulted primarily from a decrease in noninterest income of $30.5 million, or 35.2%, as well as an increase in the provision for credit losses of $6.8 million, or 120.4% , and a $5.3 million, or 2.7% decrease in net interest income.

Partially offsetting these unfavorable variances was a decrease in income tax expense of $9.3 million, or 34.7%, and a $5.8 million, or 3.3%, decrease in noninterest expense.

Net income for the six months ended June 30, 2022 represents annualized returns on average equity and average assets of 8.01% and 0.87%, respectively, compared to 11.61% and 1.27% for the six months ended June 30, 2021.

Comparison of Operating Results for the Nine Months Ended September 30, 2022 and 2021

Net income for the nine months ended September 30, 2022 was $99.0 million, or $0.78 per diluted share, a decrease of $25.3 million, or 20.3%, from $124.3 million, or $0.97 per diluted share, for the nine months ended September 30, 2021.

The decrease in net income resulted primarily from a decrease in noninterest income of $32.9 million, or 28.4%, as well as an increase in the provision for credit losses of $18.8 million, or 188.6% .

These unfavorable fluctuations were partially offset by a $9.3 million, or 3.6%, decrease in noninterest expense, a $9.0 million, or 3.1%, increase in net interest income, and a decrease in income tax expense of $8.1 million, or 21.5%.

Net income for the nine months ended September 30, 2022 represents annualized returns on average equity and average assets of 8.61% and 0.93%, respectively, compared to 10.67% and 1.17% for the nine months ended September 30, 2021.

A further discussion of notable changes follows.

Interest Income

Total interest income decreased by $8.2 million, or 3.9%, to $202.3 million for the six months ended June 30, 2022 from $210.6 million for the six months ended June 30, 2021.

This decrease is the result of a decrease in the average yield earned on interest-earning assets to 3.05% for the six months ended June 30, 2022 from 3.23% for the six months ended June 30, 2021.

Despite the recent rising rate environment, loan yields are down year over year and have only started to rise during the quarter ended June 30, 2022.

Partially offsetting this decrease was an increase in the average balance of interest-earning assets by $301.4 million, or 2.3%, to $13.371 billion for the six months ended June 30, 2022 from $13.070 billion for the six months ended June 30, 2021 p rimarily driven by growth in the mortgage-backed securities portfolio and interest-earning deposits .

Interest income on loans receivable decreased by $13.8 million, or 7.0%, to $183.7 million for the six months ended June 30, 2022 from $197.6 million for the six months ended June 30, 2021.

This decrease is attributed to a decrease in the average balance of loans receivable by $322.1 million, or 3.1%, to $10.030 billion for the six months ended June 30, 2022 from $10.352 billion for the six months ended June 30, 2021 due primarily to PPP loan forgiveness and the payoff of several classified commercial real estate loan relationships.

Additionally, the average yield on loans receivable decreased to 3.69% for the six months ended June 30, 2022 from 3.83% for the six months ended June 30, 2021 despite the recent rise in market interest rates.

Interest income on mortgage-backed securities increased by $3.6 million, or 36.8%, to $13.5 million for the six months ended June 30, 2022 from $9.9 million for the six months ended June 30, 2021.

This increase is attributed to an increase in the average balance of mortgage-backed securities of $407.2 million, or 26.4%, to $1.949 billion for the six months ended June 30, 2022 from $1.542 billion for the six months ended June 30, 2021.

This increase in average balance was primarily a result of additional purchases utilizing excess cash from deposit growth during the past year.

Additionally, the average yiel d on mortgage-backed securities increased to 1.39% for the six months ended June 30, 2022 from 1.28% for the six months ended June 30, 2021 due to the purchase of fixed rate mortgage-backed securities with yields higher than the existing portfolio.

Interest income on investment securities increased by $253,000, or 10.1%, to $2.7 million for the six months ended June 30, 2022 from $2.5 million for the six months ended June 30, 2021.

This increase is primarily attributable to an increase in the average balance of investment securities by $27.3 million, or 7.9%, to $375.3 million for the six months ended June 30, 2022 from $348.0 million for the six months ended June 30, 2021.

Additionally, the average yield on investment securities increased slightly to 1.46% for the six months ended June 30, 2022 from 1.43% for the six months ended June 30, 2021.

Dividends on FHLB stock decreased by $91,000, or 35.8%, to $163,000 for the six months ended June 30, 2022 from $254,000 for the six months ended June 30, 2021.

This decrease was due to an $8.8 million, or 39.2%, decrease in the average balance of FHLB stock to $13.6 million for the six months ended June 30, 2022 from $22.5 million for the six months ended June 30, 2021.

Total interest income increased by $5.4 million, or 1.7%, to $320.9 million for the nine months ended September 30, 2022 from $315.6 million for the nine months ended September 30, 2021.

This increase is the result of increases in the average yield earned on interest-earning assets as well as the average balance of interest-earning assets, and specifically the change in our interest-earning asset mix.

The average yield earned on interest-earning assets increased to 3.23% for the nine months ended September 30, 2022 from 3.20% for the nine months ended September 30, 2021 due to the recent rising interest rate environment.

The average balance of interest-earning assets increased by $143.0 million, or 1.1%, to $13.301 billion for the nine months ended September 30, 2022 from $13.158 billion for the nine months ended September 30, 2021 p rimarily driven by growth in the mortgage-backed securities portfolio which offset the decreases in the average balance of loans receivable.

Interest income on loans receivable decreased by $4.4 million, or 1.5%, to $290.7 million for the nine months ended September 30, 2022 from $295.0 million for the nine months ended September 30, 2021.

This decrease is attributed to a decrease in the average balance of loans receivable by $127.7 million, or 1.2%, to $10.182 billion for the nine months ended September 30, 2022 from $10.309 billion for the nine months ended September 30, 2021 due primarily to PPP loan forgiveness and the payoff of several classified commercial real estate loan relationships.

The average yield remained consistent at 3.82% for the nine months ended September 30, 2022 and September 30, 2021.

Interest income on mortgage-backed securities increased by $6.5 million, or 41.2%, to $22.2 million for the nine months ended September 30, 2022 from $15.7 million for the nine months ended September 30, 2021.

This increase is attributed to increases in both the average balance and the average yield of mortgage-backed securities.

The average balance increased $332.9 million, or 20.3%, to $1.973 billion for the nine months ended September 30, 2022 from $1.640 billion for the nine months ended September 30, 2021.

This increase was primarily a result of additional purchases as we deployed interest-earning deposits into higher yielding investments.

Additionally, the average yiel d on mortgage-backed securities increased to 1.50% for the nine months ended September 30, 2022 from 1.28% for the nine months ended September 30, 2021 due to the purchase of fixed-rate mortgage-backed securities with yields higher than the existing portfolio.

Interest income on investment securities increased by $523,000, or 13.9%, to $4.3 million for the nine months ended September 30, 2022 from $3.8 million for the nine months ended September 30, 2021.

This increase is primarily attributable to an increase in the average balance of investment securities by $31.7 million, or 9.1%, to $379.9 million for the nine months ended September 30, 2022 from $348.2 million for the nine months ended September 30, 2021.

Additionally, the average yield on investment securities increased to 1.51% for the nine months ended September 30, 2022 from 1.44% for the nine months ended September 30, 2021.

Dividends on FHLB stock decreased by $14,000, or 4.3%, to $311,000 for the nine months ended September 30, 2022 from $325,000 for the nine months ended September 30, 2021.

This decrease was due to an $8.4 million, or 37.9%, decrease in the average balance of FHLB stock to $13.8 million for the nine months ended September 30, 2022 from $22.2 million for the nine months ended September 30, 2021.

Required FHLB stock holdings fluctuate with, among other things, the utilization of our borrowing capacity as well as capital requirements established by the FHLB.

Partially offsetting the decrease in the balance was an increase in the average yield on FHLB stock to 2.41% for the six months ended June 30, 2022 from 2.27% for the six months ended June 30, 2021 as the FHLB of Pittsburgh increased yields on required stock holdings due to higher market interest rates.

Interest income on interest-earning deposits increased by $1.8 million to $2.2 million for the six months ended June 30, 2022 from $375,000 for the six months ended June 30, 2021.

This increase is attributable to an increase in the average balance of interest-earning deposits by $197.7 million, or 24.5%, to $1.004 billion for the six months ended June 30, 2022 from $805.9 million for the six months ended June 30, 2021.

Additionally, the average yield on interest-earning deposits increased to 0.43% for the six months ended June 30, 2022 from 0.09% for the six months ended June 30, 2021, as a result of increases in the targeted federal funds rate by the Federal Reserve.

Partially offsetting the decrease in the balance was an increase in the average yield on FHLB stock to 3.02% for the nine months ended September 30, 2022 from 1.95% for the nine months ended September 30, 2021 as the FHLB of Pittsburgh increased dividend rates on required stock holdings in relation to higher market interest rates.

Interest income on interest-earning deposits increased by $2.7 million to $3.4 million for the nine months ended September 30, 2022 from $727,000 for the nine months ended September 30, 2021.

This increase is attributable to an increase in the average yield on interest-earning deposits to 0.60% for the nine months ended September 30, 2022 from 0.11% for the nine months ended September 30, 2021, as a result of increases in the targeted federal funds rate by the Federal Reserve.

This was partially offset by a decrease in the average balance of interest-earning deposits by $85.5 million, or 10.2%, to $753.5 million for the nine months ended September 30, 2022 from $839.0 million for the nine months ended September 30, 2021 as we deployed funds into higher yielding investments.

Interest Expense

Interest expense decreased by $3.0 million, or 20.5%, to $11.4 million for the six months ended June 30, 2022 from $14.4 million for the six months ended June 30, 2021.

This decrease in interest expense was driven by a decrease in the average cost of interest-bearing liabilities to 0.24% for the six months ended June 30, 2022 from 0.31% for the six months ended June 30, 2021.

Interest expense decreased by $3.7 million, or 17.5%, to $17.3 million for the nine months ended September 30, 2022 from $21.0 million for the nine months ended September 30, 2021.

This decrease in interest expense was driven by decreases in both the average cost and the average balance of interest-bearing liabilities.

The average cost of interest-bearing liabilities decreased to 0.25% for the nine months ended September 30, 2022 from 0.30% for the nine months ended September 30, 2021.

This decrease resulted from decreases in the interest rate paid on deposits as well as the change in deposit mix as customers chose to move funds from fixed-rate time deposits to more liquid deposit accounts.

Despite a rising interest rate environment, we have been able to keep our cost of deposits stable.

Additionally, the yield on time deposits has continued to decrease, from 0.91% for the six months ended June 30, 2021 to 0.64% for the six months ended June 30, 2022, as time deposits with higher rates are maturing and rolling into lower rate deposit products.

Partially offsetting this decrease was an increase in the average balance of interest-bearing liabilities by $66.6 million, or 0.7%, to $9.512 billion for the six months ended June 30, 2022 from $9.445 billion for the six months ended June 30, 2021.

This increase in the average balance resulted from growth in deposits over the past year.

Additionally, the yield on time deposits has continued to decrease, from 0.87% for the nine months ended September 30, 2021 to 0.60% for the nine months ended September 30, 2022, as time deposits with higher rates matured and rolled into lower rate deposit products.

This decrease in time deposits has contributed largely to a decrease in the average balance of interest-bearing liabilities of $50.1 million, or 0.5%, to $9.425 billion for the nine months ended September 30, 2022 from $9.475 billion for the nine months ended September 30, 2021.

Net Interest Income

Net interest income decreased by $5.3 million, or 2.7%, to $190.9 million for the six months ended June 30, 2022 from $196.2 million for the six months ended June 30, 2021.

This decrease is attributable to the factors discussed above.

Our interest rate spread and net interest margin both decreased over the course of the year.

Our interest rate spread decreased to 2.81% for the six months ended June 30, 2022 from 2.92% for the six months ended June 30, 2021 and our net interest margin decreased to 2.86% for the six months ended June 30, 2022 from 3.00% for the six months ended June 30, 2021.

These decreases were primarily due to declining interest-earning asset yields on loans receivable.

Net interest income increased by $9.0 million, or 3.1%, to $303.6 million for the nine months ended September 30, 2022 from $294.6 million for the nine months ended September 30, 2021.

This increase is attributable to the factors discussed above.

Our interest rate spread and net interest margin both increased over the course of the year.

Our interest rate spread increased to 2.98% for the nine months ended September 30, 2022 from 2.91% for the nine months ended September 30, 2021 and our net interest margin increased to 3.05% for the nine months ended September 30, 2022 from 2.99% for the nine months ended September 30, 2021.

These increases were driven largely by increasing interest rates and a change in balance sheet mix.

Provision for Credit Losses

The provision for credit losses increased by $6.8 million, or 120.4%, to a current period provision expense of $1.1 million for the six months ended June 30, 2022 from a negative provision of $5.6 million for the six months ended June 30, 2021.

The current period provision was driven by the current portfolio mix, changes to asset quality and classified assets and the most recent economic forecasts.

The provision for credit losses increased by $18.8 million, or 188.6%, to a current period provision expense of $8.8 million for the nine months ended September 30, 2022 from a negative provision of $10.0 million for the nine months ended September 30, 2021.

The current period provision was driven primarily by growth within our loan portfolio as well as a deterioration in the most recent economic forecasts.

T he negative provision in the prior year was driven by the improvements in the economic forecasts compared to the uncertainty that existed in 2020 for industries impacted by COVID-19

Annualized net charge-offs to average loans decreased to 0.10% for the six months ended June 30, 2022 from 0.22% for the six months ended June 30, 2021.

Additionally, classified assets declined by $175.7 million, or 38.8%, to $277.4 million, or 2.66% of loans outstanding at June 30, 2022 from $453.1 million, or 4.39% of loans outstanding at June 30, 2021.

Annualized net charge-offs to average loans decreased to 0.02% for the nine months ended September 30, 2022 from 0.19% for the nine months ended September 30, 2021.

Additionally, classified assets declined by $146.6 million, or 38.1%, to $237.7 million, or 2.21% of loans outstanding at September 30, 2022 from $384.4 million, or 3.77% of loans outstanding at September 30, 2021.

In determining the amount of the current period provision, we considered current economic conditions, including but not limited to unemployment levels, bankruptcy filings, and changes in real estate values and the impact of these factors on the quality of our loan portfolio and historical loss experience.

We analyze the allowance for credit losses as described in the section entitled “Allowance for Credit Losses.” The provision that is recorded is sufficient, in our judgment, to bring this reserve to a level that reflects the current expected lifetime losses in our loan portfolio relative to loan mix, a reasonable and supportable economic forecast period and historical loss experience at June 30, 2022.

Noninterest Income

Noninterest income decreased by $30.5 million, or 35.2%, to $56.2 million for the six months ended June 30, 2022 from $86.7 million for the six months ended June 30, 2021.

This decrease was primarily driven by the sale of the insurance business on April 30, 2021, during the six months ended June 30, 2021, resulting in a $25.3 million pre-tax gain.

This insurance business sale in the prior year also resulted in a decrease in insurance commission income of $3.6 million from the six months ended June 30, 2021.

In addition, mortgage banking income decreased by $6.2 million, or 63.2%, due to the impact of less favorable secondary market pricing.

Partially offsetting these decreases were $1.6 million increases in both service charges and fees and other operating income.

Service charges and fees increased to $26.7 million for the six months ended June 30, 2022 from $25.1 million for the six months ended June 30, 2021 due to increased customer activity in 2022 after COVID-19 restricted behavior in the prior year.

Other operating income increased to $7.1 million for the six months ended June 30, 2022 from $5.5 million for the six months ended June 30, 2021 due to an increase in swap fee income as well as a gain of approximately $1.0 million from the sale of branch buildings associated with the previously announced consolidation of 20 branch office facilities.

Noninterest income decreased by $32.9 million, or 28.4%, to $83.0 million for the nine months ended September 30, 2022 from $115.8 million for the nine months ended September 30, 2021.

This decrease was primarily driven by the sale of our insurance business on April 30, 2021, resulting in a $25.3 million pre-tax gain during the prior nine month period.

This insurance business sale in the prior year also resulted in a decrease in insurance commission income of $3.6 million from the nine months ended September 30, 2021.

In addition, mortgage banking income decreased by $9.4 million, or 68.1%, due to the impact of less favorable secondary market pricing, as well as decreased mortgage volumes.

Partially offsetting these decreases was a $2.7 million, or 7.1%, increase in service charges and fees to $41.1 million for the nine months ended September 30, 2022 from $38.3 million for the nine months ended September 30, 2021 due to increased customer activity in 2022 after COVID-19 restricted behavior in the prior year.

In addition, other operating income increased $1.6 million, or 18.6%, to $10.4 million for the nine months ended September 30, 2022 from $8.8 million for the nine months ended September 30, 2021 due to an increase in swap fee income as well as a gain of approximately $1.0 million from the sale of branch buildings associated with the previously announced consolidation of 20 branch office facilities.

Noninterest Expense

Noninterest expense decreased by $5.8 million, or 3.3%, to $166.8 million for the six months ended June 30, 2022, from $172.5 million for the six months ended June 30, 2021.

This decrease was driven by a $3.1 million, or 10.9%, decrease in processing expenses to $25.5 million for the six months ended June 30, 2022 from $28.6 million for the six months ended June 30, 2021 due to the prior year investment in technology and infrastructure.

Additionally, professional service expense decreased by $2.9 million, or 33.0%, to $5.9 million for the six months ended June 30, 2022 from $8.8 million for the six months ended June 30, 2021 due to utilization of third-party experts to recruit talent and to assist with our digital strategy rollout during the prior year.

Compensation and employee benefits expense decreased $1.1 million, or 1.2%, to $95.0 million for the six months ended June 30, 2022 from $96.1 million for the six months ended June 30, 2021 despite recognizing approximately $1.4 million of additional expense related to the acceleration of compensation and stock benefits upon Mr.

Seiffert's passing.

Noninterest expense decreased by $9.3 million, or 3.6%, to $249.3 million for the nine months ended September 30, 2022, from $258.6 million for the nine months ended September 30, 2021.

Spread across almost all expense categories, this decrease was driven by a $3.8 million, or 29.3%, decrease in professional service expense to $9.3 million for the nine months ended September 30, 2022 from $13.1 million for the nine months ended September 30, 2021 due to the utilization of third-party experts to recruit talent, provide consulting services, and to assist with our digital strategy rollout during the prior year.

Compensation and employee benefits expense decreased $3.5 million, or 2.4%, to $141.7 million for the nine months ended September 30, 2022 from $145.2 million for the nine months ended September 30, 2021 despite recognizing approximately $1.4 million of additional expense related to the acceleration of compensation and stock benefits upon the passing of our former Chief Executive Officer.

This decrease in compensation and benefits as well as the $1.7 million, or 7.2%, decrease in premises and occupancy costs are due primarily to branch consolidations completed over the past two years.

Processing expenses decreased $3.2 million, or 7.6%, to $38.9 million for the nine months ended September 30, 2022 from $42.1 million for the nine months ended September 30, 2021 due to the prior year investment in technology and infrastructure.

Partially offsetting these decreases, was a $4.5 million, or 64.3%, increase in other expenses due to an increase in the reserve for unfunded commitments resulting from the origination of loans with current off balance sheet exposure.

The provision for income taxes decreased by $9.3 million, or 34.7%, to $17.5 million for the six months ended June 30, 2022 from $26.7 million for the six months ended June 30, 2021.

The provision for income taxes decreased by $8.1 million, or 21.5%, to $29.5 million for the nine months ended September 30, 2022 from $37.5 million for the nine months ended September 30, 2021.

This decrease was primarily due to the decrease in income before tax of $33.3 million, or 20.6%.

5 unchanged sentences

Average balances are calculated using daily averages.

Quarter ended June 30,

Quarter ended September 30,

balance Interest Avg.

39 unchanged sentences

(f) Average balances include FHLB borrowings and collateralized borrowings.

(g) Average cost of deposits were 0.11% and 0.16%, respectively.

(g) Average cost of total deposits was 0.11% and 0.15%, respectively.

(h) Annualized.

13 unchanged sentences

Changes that cannot be attributed to either rate or volume have been allocated to both rate and volume.

For the quarter ended June 30, 2022 vs.

For the quarter ended September 30, 2022 vs.

Increase/(decrease) due to Total

22 unchanged sentences

Average balances are calculated using daily averages.

Six months ended June 30,

Nine months ended September 30,

balance Interest Avg.

39 unchanged sentences

(f) Average balances include FHLB borrowings and collateralized borrowings.

(g) Average cost of deposits were 0.12% and 0.17%, respectively.

(g) Average cost of total deposits was 0.11% and 0.16%, respectively.

(h) Annualized.

13 unchanged sentences

Changes that cannot be attributed to either rate or volume have been allocated to both rate and volume.

For the six months ended June 30, 2022 vs.

For the nine months ended September 30, 2022 vs.

Increase/(decrease) due to Total

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis