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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-09 · 160 added, 144 removed, 144 unchanged (68% of the section changed)

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Forward-Looking Statements

Certain statements contained herein are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

Certain statements contained herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” "project," "intend," “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms.

Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those set forth in Item 1A of the Company's Annual Report on Form 10-K, as supplemented by its Quarterly Reports on Form 10-Q, and those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S.

Government, changes in accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, inflation and changes in the interest rate environment that may reduce our margins and yields, may reduce the fair value of financial instruments or may reduce our volume of loan originations, or may increase the level of defaults, losses and prepayments on loans the Company has made and may make whether held in portfolio or sold in the secondary market, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets and the availability of and costs associated with sources of liquidity.

In addition, the COVID-19 pandemic continues to have an uncertain impact on the Company, its customers and the communities it serves.

Government, changes in accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets, the availability of and costs associated with sources of liquidity, the ability to complete, or any delays in completing, the pending merger between the Company and Lakeland;

any failure to realize the anticipated benefits of the transaction when expected or at all;

certain restrictions during the pendency of the transaction that may impact the Company’s ability to pursue certain business opportunities or strategic transactions; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management’s attention from ongoing business operations and opportunities;

and potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger and integration of the companies.

In addition, the effects of the COVID-19 pandemic continue to have an uncertain impact on the Company, its customers and the communities it serves.

Given its ongoing and dynamic nature, including potential variants, it is difficult to predict the continuing impact of the pandemic on the Company's business, financial condition or results of operations.

The extent of such impact will depend on future developments, which remain highly uncertain, including when the pandemic will be controlled and abated, and the extent to which the economy can remain open.

The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made.

The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date they are made.

The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements.

The Company does not have any obligation to update any forward-looking statements to reflect events or circumstances after the date of this statement.

The Company does not assume any duty, and does not undertake, to update any forward-looking statements to reflect events or circumstances after the date of this statement.

Lakeland Bancorp, Inc.

Merger Agreement

On September 26, 2022, the Company entered into a definitive merger agreement pursuant to which it will merge (the “merger”) with Lakeland Bancorp, Inc.

("Lakeland"), and Lakeland Bank, a wholly owned subsidiary of Lakeland, will merge with and into Provident Bank, a wholly owned subsidiary of the Company.

The merger agreement has been unanimously approved by the boards of directors of both companies.

The actual value of the Company’s common stock to be recorded as consideration in the merger will be based on the closing price of Company’s common stock at the time of the merger completion date.

Under the merger agreement, each share of Lakeland common stock will be exchanged for 0.8319 shares of the Company's common stock plus cash in lieu of fractional shares.

The merger is expected to close in the second quarter of 2023, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by the shareholders of both companies.

Critical Accounting Policies

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Historical credit loss experience for both the Company and peers provides the basis for the estimation of expected credit losses, where observed credit losses are converted to probability of default rate (“PDR”) curves through the use of segment-specific loss given default (“LGD”) risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment, primarily due to the nature of the underlying collateral.

These risk factors were assessed for reasonableness against the Company’s own loss experience and adjusted in certain cases when the relationship between the Company’s historical default and loss severity deviate from that of the wider industry.

The historical PDR curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle.

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management has a reasonable expectation that a troubled debt restructuring (“TDR”) will be executed with an individual borrower;

or when an extension or renewal option is included in the original contract and is not unconditionally cancellable by the Company.

or when an extension or renewal option is included in the original contract and is not

unconditionally cancellable by the Company.

Management will assess the likelihood of an option being exercised by any given borrower and appropriately extend the maturity of the portfolio for modeling purposes.

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The segments have been combined or sub-segmented as needed to ensure loans of similar risk profiles are appropriately pooled.

As of June 30, 2022, the portfolio and class segments for the Company’s loan portfolio were:

As of September 30, 2022, the portfolio and class segments for the Company’s loan portfolio were:

• Mortgage Loans – Residential, Commercial Real Estate, Multi-Family and Construction

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As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Changes in estimates resulting from continuing changes in the

economic environment will be reflected in the financial statements in future periods.

In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for credit losses as an integral part of their examination process.

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A valuation allowance is established when management is unable to conclude that it is more likely than not that it will realize deferred tax assets based on the nature and timing of these items.

The Company did not require a valuation allowance at June 30, 2022 or December 31, 2021.

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2022 AND DECEMBER 31, 2021

Total assets at June 30, 2022 were $13.72 billion, a $65.3 million decrease from December 31, 2021.

The Company did not require a valuation allowance at September 30, 2022 or December 31, 2021.

COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2022 AND DECEMBER 31, 2021

Total assets at September 30, 2022 were $13.60 billion, a $177.4 million decrease from December 31, 2021.

The decrease in total assets was primarily due to a $527.6 million decrease in cash and cash equivalents and a $250.5 million decrease in total investments, partially offset by a $464.9 million increase in total loans.

The Company’s loan portfolio increased $410.8 million to $9.99 billion at June 30, 2022, from $9.58 billion at December 31, 2021.

For the six months ended June 30, 2022, loan funding, including advances on lines of credit, totaled $2.15 billion, compared with $1.67 billion for the same period in 2021.

Total PPP loans outstanding decreased $78.2 million to $16.7 million at June 30, 2022, from $94.9 million at December 31, 2021.

Excluding the net decrease in PPP loans, during the six months ended June 30, 2022, the Company experienced net increases of $309.0 million in commercial mortgage loans, $81.3 million in commercial loans, $80.7 million in multi-family loans and $44.9 million in construction loans, partially offset by net decreases in residential mortgage and consumer loans of $21.7 million and $4.7 million, respectively.

Commercial loans, consisting of commercial real estate, multi-family, commercial and construction loans, represented 85.0% of the loan portfolio at June 30, 2022, compared to 84.1% at December 31, 2021.

The Company’s loan portfolio increased $464.9 million to $10.05 billion at September 30, 2022, from $9.58 billion at December 31, 2021.

For the nine months ended September 30, 2022, loan funding, including advances on lines of credit, totaled $3.05 billion, compared with $2.54 billion for the same period in 2021.

Total PPP loans outstanding, which are included in total commercial loans, decreased $89.3 million to $5.6 million at September 30, 2022, from $94.9 million at December 31, 2021.

Excluding the decrease in PPP loans, during the nine months ended September 30, 2022, the Company experienced net increases of $410.2 million in commercial mortgage loans, $114.0 million in multi-family loans and $91.0 million in commercial loans, partially offset by net decreases in residential mortgage, construction and consumer loans of $33.3 million $16.4 million and $10.9 million, respectively.

Commercial loans, consisting of commercial real estate, multi-family, commercial and construction loans, represented 85.2% of the loan portfolio at September 30, 2022, compared to 84.1% at December 31, 2021.

The Company participates in loans originated by other banks, including participations designated as Shared National Credits (“SNCs”).

The Company’s gross commitments and outstanding balances as a participant in SNCs were $182.8 million and $117.5 million, respectively, at June 30, 2022, compared to $167.1 million and $78.5 million, respectively, at December 31, 2021.

No SNC relationships were 90 days or more delinquent at June 30, 2022.

The Company had outstanding junior lien mortgages totaling $137.9 million at June 30, 2022.

Of this total, eight loans totaling $452,300 were 90 days or more delinquent with an allowance for credit losses of $6,900.

The following table sets forth information regarding the Company’s non-performing assets as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

The Company’s gross commitments and outstanding balances as a participant in SNCs were $191.6 million and $105.6 million, respectively, at September 30, 2022, compared to $167.1 million and $78.5 million, respectively, at December 31, 2021.

No SNC relationships were 90 days or more delinquent at September 30, 2022.

The Company had outstanding junior lien mortgages totaling $138.7 million at September 30, 2022.

Of this total, three loans totaling $124,200 were 90 days or more delinquent with an allowance for credit losses of $2,300.

The following table sets forth information regarding the Company’s non-performing assets as of September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

Mortgage loans:

9 unchanged sentences

Total non-performing assets $ 61,554 56,758

The following table sets forth information regarding the Company’s 60-89 day delinquent loans as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

The following table sets forth information regarding the Company’s 60-89 day delinquent loans as of September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

Mortgage loans:

5 unchanged sentences

Total 60-89 day delinquent loans $ 1,816 6,608

At June 30, 2022, the Company’s allowance for credit losses related to the loan portfolio was 0.79% of total loans, compared to 0.84% and 0.85% at December 31, 2021 and June 30, 2021, respectively.

The Company recorded a provision for credit losses on loans of $3.0 million for the three months ended June 30, 2022 and a negative provision for credit losses on loans of $3.4 million for the six months ended June 30, 2022, compared with negative provisions of $10.7 million and $25.7 million for the three and six months ended June 30, 2021, respectively.

For the three and six months ended June 30, 2022, the Company had net charge-offs of $259,000 and net recoveries of $1.7 million, respectively, compared to net recoveries of $6.1 million and $5.2 million, respectively, for the same periods in 2021.

The allowance for credit losses decreased $1.7 million to $79.0 million at June 30, 2022 from $80.7 million at December 31, 2021.

The decrease in the period-over-period provision benefit was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period.

Total non-performing loans were $40.4 million, or 0.40% of total loans at June 30, 2022, compared to $48.0 million, or 0.50% of total loans at December 31, 2021.

The $7.6 million decrease in non-performing loans consisted of an $8.6 million decrease in non-performing commercial loans, a $2.7 million decrease in non-performing residential mortgage loans and a $718,000 decrease in non-performing consumer loans, partially offset by a $1.7 million increase in non-performing commercial mortgage loans and a $1.1 million increase in non-performing construction loans.

At June 30, 2022 and December 31, 2021, the Company held foreclosed assets of $9.1 million and $8.7 million, respectively.

During the six months ended June 30, 2022, there were two additions to foreclosed assets with an aggregate carrying value of $625,000, one property sold with an aggregate carrying value of $80,000 and a valuation charge of $200,000.

Foreclosed assets at June 30, 2022 consisted primarily of commercial real estate.

Total non-performing assets at June 30, 2022 decreased $7.2 million to $49.5 million, or 0.36% of total assets, from $56.8 million, or 0.41% of total assets at December 31, 2021.

Cash and cash equivalents were $277.5 million at June 30, 2022, a $434.9 million decrease from December 31, 2021, primarily as a result of decreases in short term investments.

Total investments were $2.41 billion at June 30, 2022, a $115.8 million decrease from December 31, 2021.

At September 30, 2022, the Company’s allowance for credit losses related to the loan portfolio was 0.88% of total loans, compared to 0.84% at December 31, 2021 and September 30, 2021, respectively.

The Company recorded a provision for credit losses on loans of $8.4 million and $5.0 million for the three and nine months ended September 30, 2022, compared with a provision of $1.0 million and a negative provision of $24.7 million for the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2022, the Company had net recoveries of $1.2 million and $2.9 million, respectively, compared to net charge-offs of $1.9 million and net recoveries of $3.3 million, respectively, for the same periods in 2021.

The allowance for credit losses increased $7.9 million to $88.6 million at September 30, 2022 from $80.7 million at December 31, 2021.

The increase in the period-over-period provision for credit losses was largely a function of the significant favorable impact of the post-pandemic recovery resulting in a large negative provision taken in the prior year period, combined with the current weakening economic forecast and an increase in total loans outstanding.

Total non-performing loans were $59.5 million, or 0.59% of total loans at September 30, 2022, compared to $48.0 million, or 0.50% of total loans at December 31, 2021.

The $11.5 million increase in non-performing loans consisted of an $18.5 million increase in non-performing commercial mortgage loans, partially offset by a $3.4 million decrease in non-performing commercial loans, a $3.0 million decrease in non-performing residential mortgage loans, a $1.3 million decrease in non-performing consumer loans and a $487,000 decrease in non-performing construction loans.

At September 30, 2022 and December 31, 2021, the Company held foreclosed assets of $2.1 million and $8.7 million, respectively.

During the nine months ended September 30, 2022, there were four additions to foreclosed assets with an aggregate carrying value of $1.1 million, three properties sold with an aggregate carrying value of $7.6 million and a valuation charge of $200,000.

Foreclosed assets at September 30, 2022 consisted primarily of commercial real estate.

Total non-performing assets at September 30, 2022 increased $4.8 million to $61.6 million, or 0.45% of total assets, from $56.8 million, or 0.41% of total assets at December 31, 2021.

Cash and cash equivalents were $184.9 million at September 30, 2022, a $527.6 million decrease from December 31, 2021, primarily due to the reinvestment of excess liquidity into higher yielding loans, combined with a decrease in short term investments.

Total investments were $2.28 billion at September 30, 2022, a $250.5 million decrease from December 31, 2021.

This decrease was primarily due to an increase in unrealized losses on available for sale debt securities, repayments of mortgage-backed securities and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities.

Total deposits decreased $359.8 million during the six months ended June 30, 2022, to $10.87 billion.

Total savings and demand deposit accounts decreased $333.9 million to $10.21 billion at June 30, 2022, while total time deposits decreased $25.9 million to $666.6 million at June 30, 2022.

The decrease in savings and demand deposits was largely attributable to a $463.6 million decrease in interest bearing demand deposits, as the Company shifted $360.0 million of brokered demand deposits into lower-costing Federal Home Loan Bank of New York ("FHLB") borrowings, partially offset by a $52.3 million increase in non-interest bearing demand deposits, a $51.8 million increase in savings deposits and a $25.5 million increase in money market deposits.

Total deposits decreased $548.4 million during the nine months ended September 30, 2022, to $10.69 billion.

Total savings and demand deposit accounts decreased $536.0 million to $10.01 billion at September 30, 2022, while total time deposits decreased $12.4 million to $680.1 million at September 30, 2022.

The decrease in savings and demand deposits was largely attributable to a $296.3 million decrease in interest bearing demand deposits, as the Company shifted $360.0 million of brokered demand deposits into lower-costing Federal Home Loan Bank of New York ("FHLB") borrowings, a $196.9 million decrease in money market deposits and an $84.1 million decrease in non-interest bearing demand deposits, partially offset by a $41.3 million increase in savings deposits.

The decrease in time deposits was primarily due to maturities of longer-term retail time deposits, partially offset by the inflow of brokered time deposits.

Borrowed funds increased $375.7 million during the six months ended June 30, 2022, to $1.00 billion.

The increase in borrowings for the period was largely due to the maturity and replacement of brokered deposits into lower-costing FHLB borrowings.

Borrowed funds represented 7.3% of total assets at June 30, 2022, an increase from 4.5% at December 31, 2021.

Stockholders’ equity decreased $111.8 million during the six months ended June 30, 2022, to $1.59 billion, primarily due to an increase in unrealized losses on available for sale debt securities, dividends paid to stockholders and common stock repurchases, partially offset by net income earned for the period.

For the three months ended June 30, 2022, common stock repurchases totaled 760,466 shares at an average cost of $23.00 per share.

For the six months ended June 30, 2022, common stock repurchases totaled 2,042,541 shares at an average cost of $23.23 per share, of which 15,457 shares, at an average cost of $23.48 per share, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation.

At June 30, 2022, approximately 1.1 million shares remained eligible for repurchase under the current stock repurchase authorization.

Borrowed funds increased $436.8 million during the nine months ended September 30, 2022, to $1.06 billion.

The increase in borrowings was largely due to the maturity and replacement of brokered deposits into lower-costing FHLB borrowings.

Borrowed funds represented 7.8% of total assets at September 30, 2022, an increase from 4.5% at December 31, 2021.

Stockholders’ equity decreased $146.1 million during the nine months ended September 30, 2022, to $1.55 billion, primarily due to an increase in unrealized losses on available for sale debt securities, dividends paid to stockholders and common stock repurchases, partially offset by net income earned for the period.

For the nine months ended September 30, 2022, common stock repurchases totaled 2,045,037 shares at an average cost of $23.23 per share, of which 17,746 shares, at an average cost of $23.52 per share, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation.

At September 30, 2022, approximately 1.1 million shares remained eligible for repurchase under the current stock repurchase authorization.

Liquidity and Capital Resources.

Liquidity refers to the Company’s ability to generate adequate amounts of cash to meet financial obligations to its depositors, to fund loans and securities purchases, deposit outflows and operating expenses.

Liquidity refers to the Company’s ability to generate adequate amounts of cash to meet financial obligations to its depositors, to fund loans and securities purchases and operating expenses.

Sources of funds include scheduled amortization of loans, loan prepayments, scheduled maturities of unpledged investments, cash flows from mortgage-backed securities and the ability to borrow funds from the FHLBNY and approved broker-dealers.

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In connection with its adoption of CECL on January 1, 2020, the Company elected to utilize the five-year CECL transition.

At June 30, 2022, the Bank and the Company exceeded all current minimum regulatory capital requirements as follows:

June 30, 2022

At September 30, 2022, the Bank and the Company exceeded all current minimum regulatory capital requirements as follows:

September 30, 2022

Required Required with Capital Conservation Buffer Actual

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and a total risk-based capital ratio of at least 10.00%.

COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

The Company reported net income of $39.2 million, or $0.53 per basic and diluted share for the three months ended June 30, 2022, compared to net income of $44.8 million, or $0.58 per basic and diluted share for the three months ended June 30, 2021.

For the six months ended June 30, 2022, the Company reported net income of $83.2 million, or $1.11 per basic share and diluted share, compared to net income of $93.3 million, or $1.22 per basic and diluted share, for the same period last year.

COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

The Company reported net income of $43.4 million, or $0.58 per basic and diluted share for the three months ended September 30, 2022, compared to net income of $37.3 million, or $0.49 per basic and diluted share, for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, the Company reported net income of $126.6 million, or $1.69 per basic share and diluted share, compared to net income of $130.6 million, or $1.71 per basic share and $1.70 per diluted share, for the nine months ended September 30, 2021.

Current quarter earnings were impacted by $2.9 million of non-tax deductible transaction costs related to the pending merger with Lakeland that was announced on September 27, 2022.

Net Interest Income .

Total net interest income increased $8.6 million to $99.5 million for the three months ended June 30, 2022, from $90.9 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, total net interest income increased $13.1 million to $194.0 million, from $180.9 million for the same period in 2021.

Interest income for the three months ended June 30, 2022 increased $5.7 million to $106.3 million, from $100.5 million for the same period in 2021.

For the six months ended June 30, 2022, interest income increased $6.2 million to $207.3 million, from $201.1 million for the six months ended June 30, 2021.

Interest expense decreased $2.8 million to $6.8 million for the three months ended June 30, 2022, from $9.6 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, interest expense decreased $6.9 million to $13.3 million, from $20.2 million for the six months ended June 30, 2021.

The increase in net interest income for the three months ended June 30, 2022, was primarily driven by growth in average earning assets, largely due to increases in available for sale debt securities and average loans outstanding, funded by growth in lower-costing core deposits and the reinvestment of cash proceeds from PPP loan satisfactions.

The increase in net interest income for the six months ended June 30, 2022, was primarily driven by a reduction in funding costs, growth in lower-costing core and non-interest bearing deposits and an increase in available for sale debt securities.

Net interest income was further enhanced by the favorable repricing of adjustable rate loans and an increase in rates on new loan originations.

Both periods increase in net interest income were partially offset by a reduction in fees related to the forgiveness of PPP loans.

For the three and six months ended June 30, 2022, the accretion of fees related to the forgiveness of PPP loans totaled $192,000 and $1.3 million, respectively, which were recognized in interest income, compared to $2.9 million and $6.9 million for the three and six months ended June 30, 2021.

The net interest margin increased 22 basis points to 3.21% for the quarter ended June 30, 2022, compared to 2.99% for the quarter ended June 30, 2021.

The weighted average yield on interest-earning assets increased 12 basis points to 3.43% for the quarter ended June 30, 2022, compared to 3.31% for the quarter ended June 30, 2021, while the weighted average cost of interest bearing liabilities decreased 13 basis points for the quarter ended June 30, 2022 to 0.31%, compared to the quarter ended June 30, 2021.

The average cost of interest bearing deposits for the quarter ended June 30, 2022 was 0.27%, compared to 0.34% for the same period last year.

Average non-interest bearing demand deposits totaled $2.78 billion for the quarter ended June 30, 2022, compared to $2.48 billion for the quarter ended June 30, 2021.

The average cost of total deposits, including non-interest bearing deposits, was 0.20% for the quarter ended June 30, 2022, compared with 0.26% for the quarter ended June 30, 2021.

The average cost of borrowed funds for the quarter ended June 30, 2022 was 0.84%, compared to 1.18% for the same period last year.

For the six months ended June 30, 2022, the net interest margin increased nine basis points to 3.11%, compared to 3.02% for the six months ended June 30, 2021.

The weighted average yield on interest earning assets declined three basis points to 3.33% for the six months ended June 30, 2022, compared to 3.36% for the six months ended June 30, 2021, while the weighted average cost of interest bearing liabilities decreased 16 basis points to 0.30% for the six months ended June 30, 2022, compared to 0.46% for the same period last year.

The average cost of interest bearing deposits decreased 10 basis points to 0.26% for the six months ended June 30, 2022, compared to 0.36% for the same period last year.

Average non-interest bearing demand deposits totaled $2.78 billion for the six months ended June 30, 2022, compared with $2.43 billion for the six months ended June 30, 2021.

The average cost of total deposits, including non-interest bearing deposits, was 0.19% for the six months ended June 30, 2022, compared with 0.28% for the six months ended June 30, 2021.

The average cost of borrowings for the six months ended June 30, 2022 was 0.85%, compared to 1.15% for the same period last year.

Interest income on loans secured by real estate increased $6.2 million to $69.1 million for the three months ended June 30, 2022, from $62.9 million for the three months ended June 30, 2021.

Commercial loan interest income decreased $2.8 million to $22.4 million for the three months ended June 30, 2022, from $25.2 million for the three months ended June 30, 2021.

Consumer loan interest income decreased $68,000 to $3.3 million for the three months ended June 30, 2022, from $3.4 million for the three months ended June 30, 2021.

For the three months ended June 30, 2022, the average balance of total loans increased $94.4 million to $9.68 billion, compared to the same period in 2021.

The average yield on total loans for the three months ended June 30, 2022, increased 10 basis points to 3.89%, from 3.79% for the same period in 2021.

Interest income on loans secured by real estate increased $8.0 million to $132.9 million for the six months ended June 30, 2022, from $124.9 million for the six months ended June 30, 2021.

Commercial loan interest income decreased $6.1 million to $45.2 million for the six months ended June 30, 2022, from $51.3 million for the six months ended June 30, 2021.

Consumer loan interest income decreased $421,000 to $6.5 million for the six months ended June 30, 2022, from $6.9 million for the six

months ended June 30, 2021.

For the six months ended June 30, 2022, the average balance of total loans was $9.58 billion, compared with $9.66 billion for the same period in 2021.

The average yield on total loans for the six months ended June 30, 2022, increased five basis points to 3.84%, from 3.79% for the same period in 2021.

Interest income on held to maturity debt securities decreased $211,000 to $2.5 million for the three months ended June 30, 2022, compared to the same period last year.

Average held to maturity debt securities decreased $25.9 million to $412.2 million for the three months ended June 30, 2022, from $438.1 million for the same period last year.

Interest income on held to maturity debt securities decreased $399,000 to $5.1 million for the six months ended June 30, 2022, compared to the same period in 2021.

Average held to maturity debt securities decreased $24.1 million to $420.1 million for the six months ended June 30, 2022, from $444.2 million for the same period last year.

Interest income on available for sale debt securities and FHLBNY stock increased $2.7 million to $8.5 million for the three months ended June 30, 2022, from $5.7 million for the three months ended June 30, 2021.

The average balance of available for sale debt securities and FHLBNY stock increased $607.7 million to $2.05 billion for the three months ended June 30, 2022, compared to the same period in 2021.

Interest income on available for sale debt securities and FHLBNY stock increased $5.1 million to $16.4 million for the six months ended June 30, 2022, from $11.3 million for the same period last year.

The average balance of available for sale debt securities and FHLBNY stock increased $782.1 million to $2.10 billion for the six months ended June 30, 2022.

The average yield on total securities increased to 1.74% for the three months ended June 30, 2022, compared with 1.46% for the same period in 2021.

For the six months ended June 30, 2022, the average yield on total securities increased to 1.59%, compared with 1.57% for the same period in 2021.

Interest expense on deposit accounts decreased $1.2 million to $5.6 million for the three month ended June 30, 2022, compared with $6.8 million for the three month ended June 30, 2021.

For the six months ended June 30, 2022, interest expense on deposit accounts decreased $3.4 million to $10.8 million, from $14.2 million for the same period last year.

The average cost of interest bearing deposits decreased to 0.27% and 0.26% for the three and six months ended June 30, 2022, respectively, from 0.34% and 0.36% for the three and six months ended June 30, 2021, respectively.

The average balance of interest bearing core deposits for the three months ended June 30, 2022 increased $608.5 million to $7.69 billion.

For the six months ended June 30, 2022, average interest bearing core deposits increased $842.6 million, to $7.73 billion, from $6.88 billion for the same period in 2021.

Average time deposit account balances decreased $202.6 million to $695.0 million for the three months ended June 30, 2022, from $897.6 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, average time deposit account balances decreased $282.0 million to $688.0 million, from $969.9 million for the same period in 2021.

Interest expense on borrowed funds decreased $1.4 million to $1.1 million for the three months ended June 30, 2022, from $2.6 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, interest expense on borrowed funds decreased $3.1 million to $2.3 million, from $5.4 million for the six months ended June 30, 2021.

The average cost of borrowings decreased to 0.84% for the three months ended June 30, 2022, from 1.18% for the three months ended June 30, 2021.

The average cost of borrowings decreased to 0.85% for the six months ended June 30, 2022, from 1.15% for the same period last year.

Average borrowings decreased $341.4 million to $527.6 million for the three months ended June 30, 2022, from $869.0 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, average borrowings decreased $403.1 million to $538.6 million, compared to $941.7 million for the six months ended June 30, 2021.

Total net interest income increased $18.3 million to $109.5 million for the three months ended September 30, 2022, from $91.2 million for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, total net interest income increased $31.4 million to $303.5 million, from $272.1 million for the same period in 2021.

Interest income for the three months ended September 30, 2022 increased $22.1 million to $121.7 million, from $99.6 million for the same period in 2021.

For the nine months ended September 30, 2022, interest income increased $28.3 million to $329.0 million, from $300.7 million for the nine months ended September 30, 2021.

Interest expense increased $3.9 million to $12.2 million for the three months ended September 30, 2022, from $8.4 million for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, interest expense decreased $3.0 million to $25.5 million, from $28.5 million for the nine months ended September 30, 2021.

The increase in net interest income for the three months ended September 30, 2022, was largely due to the period over period increase in the net interest margin resulting from the favorable repricing of adjustable rate loans and the reinvestment of cash flows from investment securities into higher-yielding loans.

This was partially offset by the more modest unfavorable repricing of interest-bearing liabilities.

For the three months ended September 30, 2022, fees related to the forgiveness of PPP loans decreased $2.4 million to $100,000, compared to $2.5 million for the three months ended September 30, 2021.

The increase in net interest income for the nine months ended September 30, 2022, was primarily driven by the favorable repricing of adjustable rate loans and an increase in rates on new loan originations.

Net interest income was further enhanced by growth in lower-costing core and non-interest bearing deposits and increases in available for sale debt securities and total loans outstanding.

This was partially offset by a reduction in fees related to the forgiveness of PPP loans.

For the nine months ended September 30, 2022, fees related to the forgiveness of PPP loans decreased $7.9 million to $1.4 million, compared to $9.3 million for the nine months ended September 30, 2021.

The net interest margin increased 57 basis points to 3.51% for the quarter ended September 30, 2022, compared to 2.94% for the quarter ended September 30, 2021.

The weighted average yield on interest-earning assets increased 69 basis points to 3.90% for the quarter ended September 30, 2022, compared to 3.21% for the quarter ended September 30, 2021, while the weighted average cost of interest bearing liabilities increased 17 basis points for the quarter ended September 30, 2022 to 0.54%, compared to the quarter ended September 30, 2021.

The average cost of interest bearing deposits for the quarter ended

September 30, 2022 was 0.47%, compared to 0.30% for the same period last year.

Average non-interest bearing demand deposits totaled $2.75 billion for the quarter ended September 30, 2022, compared to $2.55 billion for the quarter ended September 30, 2021.

The average cost of total deposits, including non-interest bearing deposits, was 0.35% for the quarter ended September 30, 2022, compared with 0.23% for the quarter ended September 30, 2021.

The average cost of borrowed funds for the quarter ended September 30, 2022 was 1.11%, compared to 1.08% for the same period last year.

For the nine months ended September 30, 2022, the net interest margin increased 25 basis points to 3.24%, compared to 2.99% for the nine months ended September 30, 2021.

The weighted average yield on interest earning assets increased 20 basis points to 3.51% for the nine months ended September 30, 2022, compared to 3.31% for the nine months ended September 30, 2021, while the weighted average cost of interest bearing liabilities decreased five basis points to 0.38% for the nine months ended September 30, 2022, compared to 0.43% for the same period last year.

The average cost of interest bearing deposits decreased one basis point to 0.33% for the nine months ended September 30, 2022, compared to 0.34% for the same period last year.

Average non-interest bearing demand deposits totaled $2.77 billion for the nine months ended September 30, 2022, compared with $2.47 billion for the nine months ended September 30, 2021.

The average cost of total deposits, including non-interest bearing deposits, was 0.25% for the nine months ended September 30, 2022, compared with 0.26% for the nine months ended September 30, 2021.

The average cost of borrowings for the nine months ended September 30, 2022 was 0.97%, compared to 1.13% for the same period last year.

Interest income on loans secured by real estate increased $17.8 million to $80.3 million for the three months ended September 30, 2022, from $62.5 million for the three months ended September 30, 2021.

Commercial loan interest income increased $747,000 to $25.2 million for the three months ended September 30, 2022, from $24.5 million for the three months ended September 30, 2021.

Consumer loan interest income increased $440,000 to $3.8 million for the three months ended September 30, 2022, from $3.3 million for the three months ended September 30, 2021.

For the three months ended September 30, 2022, the average balance of total loans increased $475.8 million to $9.91 billion, compared to the same period in 2021.

The average yield on total loans for the three months ended September 30, 2022, increased 61 basis points to 4.38%, from 3.77% for the same period in 2021.

Interest income on loans secured by real estate increased $25.8 million to $213.2 million for the nine months ended September 30, 2022, from $187.4 million for the nine months ended September 30, 2021.

Commercial loan interest income decreased $5.4 million to $70.4 million for the nine months ended September 30, 2022, from $75.8 million for the nine months ended September 30, 2021.

Consumer loan interest income increased $19,000 to $10.3 million for the nine months ended September 30, 2022, from $10.2 million for the nine months ended September 30, 2021.

For the nine months ended September 30, 2022, the average balance of total loans was $9.69 billion, compared with $9.58 billion for the same period in 2021.

The average yield on total loans for the nine months ended September 30, 2022, increased 23 basis points to 4.01%, from 3.78% for the same period in 2021.

Interest income on held to maturity debt securities decreased $222,000 to $2.4 million for the three months ended September 30, 2022, compared to the same period last year.

Average held to maturity debt securities decreased $33.1 million to $399.4 million for the three months ended September 30, 2022, from $432.5 million for the same period last year.

Interest income on held to maturity debt securities decreased $621,000 to $7.5 million for the nine months ended September 30, 2022, compared to the same period in 2021.

Average held to maturity debt securities decreased $27.1 million to $413.1 million for the nine months ended September 30, 2022, from $440.3 million for the same period last year.

Interest income on available for sale debt securities and FHLBNY stock increased $3.7 million to $9.6 million for the three months ended September 30, 2022, from $5.9 million for the three months ended September 30, 2021.

The average balance of available for sale debt securities and FHLBNY stock increased $320.6 million to $2.00 billion for the three months ended September 30, 2022, compared to the same period in 2021.

Interest income on available for sale debt securities and FHLBNY stock increased $8.8 million to $26.0 million for the nine months ended September 30, 2022, from $17.2 million for the same period last year.

The average balance of available for sale debt securities and FHLBNY stock increased $626.5 million to $2.07 billion for the nine months ended September 30, 2022.

The average yield on total securities increased to 2.36% for the three months ended September 30, 2022, compared with 1.32% for the same period in 2021.

For the nine months ended September 30, 2022, the average yield on total securities increased to 1.72%, compared with 1.47% for the same period in 2021.

Interest expense on deposit accounts increased $3.3 million to $9.6 million for the three month ended September 30, 2022, compared with $6.3 million for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, interest expense on deposit accounts decreased $173,000 to $20.3 million, from $20.5 million for the same period last year.

The average cost of interest bearing deposits increased to 0.47% and decreased to 0.33% for the three and nine months ended September 30, 2022, respectively, from 0.30% and 0.34% for the three and nine months ended September 30, 2021,

respectively.

The average balance of interest bearing core deposits for the three months ended September 30, 2022 increased $13.4 million to $7.42 billion.

For the nine months ended September 30, 2022, average interest bearing core deposits increased $563.2 million, to $7.62 billion, from $7.06 billion for the same period in 2021.

Average time deposit account balances decreased $135.3 million to $669.6 million for the three months ended September 30, 2022, from $804.9 million for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, average time deposit account balances decreased $232.5 million to $681.8 million, from $914.3 million for the same period in 2021.

Interest expense on borrowed funds increased $750,000 to $2.5 million for the three months ended September 30, 2022, from $1.8 million for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, interest expense on borrowed funds decreased $2.3 million to $4.8 million, from $7.1 million for the nine months ended September 30, 2021.

The average cost of borrowings increased to 1.11% for the three months ended September 30, 2022, from 1.08% for the three months ended September 30, 2021.

The average cost of borrowings decreased to 0.97% for the nine months ended September 30, 2022, from 1.13% for the same period last year.

Average borrowings increased $256.4 million to $908.8 million for the three months ended September 30, 2022, from $652.4 million for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, average borrowings decreased $180.9 million to $663.4 million, compared to $844.2 million for the nine months ended September 30, 2021.

Provision for Credit Losses.

3 unchanged sentences

Management assesses the adequacy of the allowance for credit losses on a quarterly basis and makes provisions for credit losses, if necessary, in order to maintain the valuation of the allowance.

The Company recorded a $3.0 million provision for credit losses on loans for the three months ended June 30, 2022 and a $3.4 million negative provision for credit losses for the six months ended June 30, 2022, compared with negative provisions of $10.7 million and $25.7 million for the three and six months ended June 30, 2021, respectively.

The increase in the provision for the three months ended June 30, 2022 was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period, partially offset by an overall improvement in the Company's asset quality.

The decrease in the period-over-period provision benefit for the six months ended June 30, 2022, compared to the same period last year, was largely a result of growth in the loan portfolio, the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period.

The Company recorded an $8.4 million and $5.0 million provision for credit losses on loans for the three and nine months ended September 30, 2022, respectively, compared with a provision of $1.0 million and a negative provision of $24.7 million for the three and nine months ended September 30, 2021, respectively.

The provision for credit losses in the quarter was largely a function of a weakening economic forecast, combined with additional specific reserves on impaired commercial loans of $2.4 million.

The increase in the period-over-period provision for credit losses for the nine months ended September 30, 2022 was largely a function of the significant favorable impact of the post-pandemic recovery resulting in a large negative provision taken in the prior year period, combined with the current weakening economic forecast and an increase in total loans outstanding.

Non-Interest Income.

Non-interest income totaled $20.9 million for the three months ended June 30, 2022, a decrease of $224,000, compared to the same period in 2021.

Fee income decreased $1.0 million to $7.4 million for the three months ended June 30, 2022, compared to the same period in 2021, primarily due to decreases in debit card revenue and commercial loan prepayment fees, partially offset by an increase in deposit related fees.

The decrease in debit card revenue was largely attributable to the interchange transaction fee limitation imposed by the Durbin amendment, which became effective for the Company in the third quarter of 2021.

Wealth management income decreased $835,000 to $7.0 million for the three months ended June 30, 2022, compared to the same period in 2021, primarily due to a decrease in the market value of assets under management.

Partially offsetting these decreases in non-interest income, other income increased $1.5 million to $1.9 million for the three months ended June 30, 2022, compared to the quarter ended June 30, 2021, primarily due to increases in net fees on loan-level interest rate swap transactions and net gains on the sale of loans.

For the six months ended June 30, 2022, non-interest income totaled $41.1 million, a decrease of $1.7 million, compared to the same period in 2021.

Fee income decreased $1.3 million to $14.3 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to a decrease in debit card revenue, which was curtailed by the Durbin amendment, partially offset by an increase in deposit related fees.

BOLI income decreased $1.3 million to $2.7 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to lower equity valuations and a decrease in benefit claims recognized.

Wealth management income decreased $504,000 to $14.5 million for the six months ended June 30, 2022, compared to the same period in 2021, primarily due to a decrease in the market value of assets under management and a decrease in tax preparation fees, partially offset with new business generation.

Partially offsetting these decreases in non-interest income, other income increased $864,000 to $3.1 million for the six months ended June 30, 2022, compared to $2.2 million for the same period in 2021, mainly due to an increase in net fees on loan-level interest rate swap transactions.

Also, insurance agency income totaled $6.3 million, an increase of $694,000 for the six months ended June 30, 2022, compared to the same period in 2021, largely due to an increase in contingent commissions.

Non-interest income totaled $28.4 million for the quarter ended September 30, 2022, an increase of $5.1 million, compared to the same period in 2021.

Other income increased $6.2 million to $10.4 million for the three months ended September 30, 2022, compared to the quarter ended September 30, 2021, primarily due to an $8.6 million gain realized on the sale of a foreclosed commercial office property to a purchaser who intends to reposition the property to industrial use in the current quarter, partially offset by the prior year $3.4 million reduction in the contingent consideration related to the earn-out provisions of the 2019 purchase of Tirschwell & Loewy, Inc.

Additionally, insurance agency income increased $432,000 to $2.9 million for the three months ended September 30, 2022, compared to the quarter ended September 30, 2021, largely due to strong retention revenue.

Partially offsetting these increases in non-interest income, wealth management income decreased $1.1 million to $6.8 million for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to a decrease in the market value of assets under management, while BOLI income decreased $643,000 compared to the quarter ended September 30, 2021, to $1.2 million for the three months ended September 30, 2022, primarily due to a benefit claim recognized in the prior year.

For the nine months ended September 30, 2022, non-interest income totaled $69.5 million, an increase of $3.4 million, compared to the same period in 2021.

Other income increased $7.1 million to $13.5 million for the nine months ended September 30, 2022, compared to $6.4 million for the same period in 2021, primarily due to an $8.6 million gain realized on the sale of a foreclosed commercial office property to a purchaser who intends to reposition the property to industrial use and an increase in fees on loan-level interest rate swap transactions, partially offset by income recognized from a $3.4 million reduction in the contingent consideration related to the earn-out provisions of the 2019 purchase of T&L which was recorded in the prior year.

Insurance agency income increased $1.1 million to $9.1 million for the nine months ended September 30, 2022, compared to $8.0 million for the same period in 2021, largely due to increases in contingent commissions, retention revenue and new business activity.

Partially offsetting these increases to non-interest income, BOLI income decreased $2.0 million to $4.0 million for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to a decrease in benefit claims recognized and lower equity valuations.

Wealth management income decreased $1.6 million to $21.3 million for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to a decrease in the market

value of assets under management, partially offset by new business generation.

Additionally, fee income decreased $1.1 million to $21.5 million for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to a decrease in debit card revenue, which was curtailed by the Durbin amendment beginning July 1, 2021, partially offset by an increase in deposit related fees.

Non-Interest Expense .

For the three months ended June 30, 2022, non-interest expense totaled $63.8 million, an increase of $1.1 million, compared to the three months ended June 30, 2021.

Compensation and benefits expense increased $2.6 million to $37.4 million for three months ended June 30, 2022, compared to $34.9 million for the same period in 2021.

The increase was principally due to increases in stock-based compensation, salary expense and the accrual for incentive compensation, partially offset by a decline in employee medical expenses.

Other operating expenses increased $780,000 to $9.8 million for the three months ended June 30, 2022, compared to the same period in 2021, principally due to an increase in business development expenses.

Net occupancy expenses increased $572,000 to $8.5 million for the three months ended June 30, 2022, compared to the same period in 2021, largely due to increases in rent, depreciation and maintenance expenses, while FDIC insurance decreased $220,000 due to a decrease in the insurance assessment rate, partially offset by an increase in total assets subject to assessment.

Partially offsetting these increases in non-interest expense, credit loss expense for off-balance sheet credit exposures decreased $3.0 million to a negative provision of $1.0 million for the three months ended June 30, 2022, compared to a $2.1 million provision for the same period in 2021.

The decrease was primarily the result of a decrease in the pipeline of loans approved and awaiting closing, combined with an increase in line of credit utilization, partially offset by an increase in loss factors.

Non-interest expense totaled $125.7 million for the six months ended June 30, 2022, an increase of $1.2 million, compared to $124.6 million for the six months ended June 30, 2021.

Compensation and benefits expense increased $4.3 million to $74.5 million for the six months ended June 30, 2022, compared to $70.2 million for the six months ended June 30, 2021, primarily due to increases in stock-based compensation, salary expense and the accrual for incentive compensation, partially offset by a decrease in employee benefit expenses.

Data processing expense increased $1.2 million to $11.0 million for the six months ended June 30, 2022, mainly due to increases in software subscription expense and online banking costs.

Additionally, net occupancy expense increased $602,000 to $17.8 million for the six months ended June 30, 2022, compared to the same period in 2021, mainly due to increases in rent, depreciation and maintenance expenses, a portion of which were attributable to the Company's new administrative offices.

Partially offsetting these increases, credit loss expense for off-balance sheet credit exposures decreased $4.5 million to a negative provision of $3.4 million for the six months ended June 30, 2022, compared to a $1.2 million provision for the same period last year.

FDIC insurance decreased $785,000 for the six months ended June 30, 2022, primarily due to a decrease in the insurance assessment rate, partially offset by an increase in total assets subject to assessment.

For the three months ended September 30, 2022, non-interest expense totaled $69.4 million, an increase of $6.0 million, compared to the three months ended September 30, 2021.

Other operating expenses increased $3.3 million to $12.2 million for the three months ended September 30, 2022, compared to the same period in 2021, primarily due to $2.9 million of transaction costs related to the recently announced pending merger with Lakeland.

Data processing expense increased $772,000 to $5.6 million for the three months ended September 30, 2022, compared to the same period in 2021 largely due to increases in software subscription expense and online banking costs.

Credit loss expense for off-balance sheet credit exposures increased $595,000 to $1.6 million for the three months ended September 30, 2022, compared to a $980,000 for the same period in 2021.

The increase in the provision was primarily the result of the period-over-period relative change in projected loss factors.

Additionally, compensation and benefits expense increased $525,000 to $38.1 million for three months ended September 30, 2022, compared to $37.6 million for the same period in 2021.

The increase was principally due to increases in salary expense and stock-based compensation, partially offset by a decrease in the accrual for incentive compensation.

Net occupancy expenses increased $502,000 to $8.5 million for the three months ended September 30, 2022, compared to the same period in 2021, largely due to increases in maintenance, depreciation and rent expenses.

Non-interest expense totaled $195.2 million for the nine months ended September 30, 2022, an increase of $7.2 million, compared to $188.0 million for the nine months ended September 30, 2021.

Compensation and benefits expense increased $4.8 million to $112.6 million for the nine months ended September 30, 2022, compared to $107.7 million for the nine months ended September 30, 2021, primarily due to increases in stock-based compensation and salary expense, partially offset by a decreases in the accrual for incentive compensation and post-retirement benefit expenses.

Other operating expense increased $3.3 million to $31.4 million for the nine months ended September 30, 2022, compared to $28.0 million for the nine months ended September 30, 2021, primarily due to $2.9 million of transaction costs related to the recently announced pending merger with Lakeland and valuation charges on foreclosed real estate.

Data processing expense increased $1.9 million to $16.6 million for the nine months ended September 30, 2022, mainly due to an increase in software subscription expenses.

Additionally, net occupancy expense increased $1.1 million to $26.3 million for the nine months ended September 30, 2022, compared to the same period in 2021, mainly due to increases in rent, depreciation and maintenance expenses.

Partially offsetting these increases, credit loss expense for off-balance sheet credit exposures decreased $3.9 million to a negative provision of $1.8 million for the nine months ended September 30, 2022, compared to a $2.2 million provision for the same period last year.

The decrease was primarily the result of a decrease in the pipeline of loans approved and awaiting closing and an increase in line of credit utilization, partially offset by an increase in projected loss factors.

Income Tax Expense.

For the three months ended June 30, 2022, the Company’s income tax expense was $14.3 million with an effective tax rate of 26.8%, compared with income tax expense of $15.3 million with an effective tax rate of 25.4% for the three months ended June 30, 2021.

The decrease in tax expense for the three months ended June 30, 2022, compared with the same period last year was largely the result of a decrease in taxable income, while the increase in the effective tax rate for the

three months ended June 30, 2022, compared with the three months ended June 30, 2021, was largely due to an increase in the proportion of income derived from taxable sources.

For the six months ended June 30, 2022, the Company's income tax expense was $29.6 million with an effective tax rate of 26.2%, compared with $31.5 million with an effective tax rate of 25.2% for the six months ended June 30, 2021.

The decrease in tax expense for the six months ended June 30, 2022, compared with the same period last year was largely the result of a decrease in taxable income, while the increase in the effective tax rate for the six months ended June 30, 2021, compared with the prior year was largely due to an increase in the proportion of income derived from taxable sources.

For the three months ended September 30, 2022, the Company’s income tax expense was $16.7 million with an effective tax rate of 27.7%, compared with income tax expense of $12.9 million with an effective tax rate of 25.7% for the three months ended September 30, 2021.

The increase in tax expense for the three months ended September 30, 2022, compared with the same period last year was largely the result of an increase in taxable income, while the increase in the effective tax rate for the three months ended September 30, 2022, compared with the three months ended September 30, 2021, was largely due to non-deductible merger related transaction costs of $2.9 million recognized in the current quarter and an increase in the proportion of income derived from taxable sources.

For the nine months ended September 30, 2022, the Company's income tax expense was $46.2 million with an effective tax rate of 26.7%, compared with $44.4 million with an effective tax rate of 25.4% for the nine months ended September 30, 2021.

The increase in tax expense for the nine months ended September 30, 2022, compared with the same period last year was largely the result of an increase in taxable income, while the increase in the effective tax rate for the nine months ended September 30, 2022, compared with the prior year was largely due to non-deductible merger related transaction costs of $2.9 million recognized in the current period and an increase in the proportion of income derived from taxable sources.

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