What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-07 compared with 2022-08-04 · 245 added, 232 removed, 807 unchanged (37% of the section changed)

1 unchanged sentence

The following discussion should be read in conjunction with the Corporation’s Audited Consolidated Financial Statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2021, and in conjunction with the condensed Unaudited Consolidated Financial Statements and notes thereto included in Item 1 of this report.

Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results for the full-year ended December 31, 2022 or any future period.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results for the full-year ended December 31, 2022 or any future period.

Forward-Looking Statements

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Some of the factors that might cause these differences include the following:

• ongoing disruptions in our business and operations, and changes in consumer behavior due to the COVID-19 pandemic;

• changes in political, business and economic conditions, including inflation, or legislative or regulatory initiatives;

• changes in political, business and economic conditions, including inflation;

• interest rate changes or volatility, as well as changes in the balance and mix of loans and deposits;

• changes in loan demand and collectability;

• the possibility that future credits losses are higher than currently expected due to changes in economic assumptions or adverse economic developments;

• ongoing volatility in national and international financial markets;

• interest rate changes or volatility, as well as changes in the balance and mix of loans and deposits;

• reductions in the market value or outflows of wealth management AUA;

• decreases in the value of securities and other assets;

• changes in loan demand and collectability;

• increases in defaults and charge-off rates;

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• changes in legislation or regulation and accounting principles, policies and guidelines;

• operational risks including, but not limited to, changes in information technology, cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest and future pandemics;

• operational risks including, but not limited to, changes in information technology, cybersecurity incidents, fraud, natural disasters, war, terrorism, civil unrest, the ongoing COVID-19 pandemic, and future pandemics;

• reputational risks;

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Our largest source of operating income is net interest income, which is the difference between interest earned on loans and securities and interest paid on deposits and borrowings.

In addition, we generate noninterest income from a number of

In addition, we generate noninterest income from a number of sources, including wealth management services, mortgage banking activities and deposit services.

Our principal noninterest

Management's Discussion and Analysis

sources, including wealth management services, mortgage banking activities and deposit services.

Our principal noninterest expenses include salaries and employee benefit costs, outsourced services provided by third party vendors, occupancy and facility-related costs and other administrative expenses.

expenses include salaries and employee benefit costs, outsourced services provided by third party vendors, occupancy and facility-related costs and other administrative expenses.

We continue to leverage our strong regional brand to build market share and remain steadfast in our commitment to provide superior service.

We believe the key to future growth is providing customers with convenient in-person service and digital banking solutions.

In July 2022, we opened a new commercial lending office adjacent to our existing wealth management office in New Haven, Connecticut.

In addition, we plan to open a new full-service branch in Cumberland, Rhode Island, in the third quarter of 2022.

In July 2022, we opened a new commercial lending office in New Haven, Connecticut.

In August 2022, we opened a new full-service branch in Cumberland, Rhode Island.

In addition, we recently announced that we submitted applications to establish a branch office in three northern Rhode Island locations in 2023 to further expand our branch footprint and serve the broader Rhode Island community.

The three branch offices will be located in Barrington, Providence and Smithfield, Rhode Island and are subject to federal, state, local, and regulatory approvals.

Risk Management

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They are responsible for identifying, measuring, monitoring, and controlling current and emerging risks.

They must report on and escalate their concerns.

They report on and escalate their concerns.

Corporate functions such as Credit Risk Management, Financial Administration, Information Assurance and Compliance, represent the second line of defense.

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The following table presents a summarized consolidated statement of operations:

(Dollars in thousands) Three Months Six Months

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended June 30, 2022 2021 $ % 2022 2021 $ %

Periods ended September 30, 2022 2021 $ % 2022 2021 $ %

Net interest income $42,042 $36,070 $5,972 17 % $114,648 $103,695 $10,953 11 %

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The following table presents a summary of performance metrics and ratios:

Three Months Six Months

Periods ended June 30, 2022 2021 2022 2021

Three Months Nine Months

Periods ended September 30, 2022 2021 2022 2021

Diluted earnings per common share $1.08 $1.07 $3.16 $3.24

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Noninterest income as a percentage of total revenues 27 % 36 % 30 % 39 %

Net income totaled $20.0 million and $36.4 million, respectively, for the three and six months ended June 30, 2022, compared to $17.5 million and $37.9 million, respectively, for the same periods in 2021.

In 2022, net interest income largely benefited from higher yields on, and growth in, average interest-earning assets, as well as a reduction in average wholesale funding balances.

Noninterest income declined in 2022 largely due to lower mortgage banking revenues, reflecting an overall reduction in mortgage origination and sales activity.

Results also benefited from negative provisions for credit losses in both years.

Noninterest expenses decreased, reflecting declines in debt prepayment penalty expense and salaries and employee benefits expense.

Net income totaled $18.7 million and $55.1 million, respectively, for the three and nine months ended September 30, 2022, compared to $18.8 million and $56.7 million, respectively, for the same periods in 2021.

In 2022, growth in net interest income was driven by higher yields on, and growth in, average interest-earning assets, partially offset by a higher cost of funds.

The decline in noninterest income reflected lower mortgage banking revenues resulting from an overall reduction in mortgage origination and sales activity, and lower wealth management asset-based revenues attributable to recent declines in the financial markets.

The provision for credit losses recognized in 2022 provided for loan growth and was also reflective of low loss rates, strong asset and credit quality metrics and our current estimate of forecasted economic conditions.

We experienced modest increases across a variety of noninterest expense categories, however declines in debt prepayment penalties and volume-related mortgage originator compensation expense resulted in an overall decline in year-to-date noninterest expenses in 2022.

Management's Discussion and Analysis

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Nonaccrual loans, as well as interest recognized on these loans, are included in amounts presented for loans.

Three months ended June 30, 2022 2021 Change

Three months ended September 30, 2022 2021 Change

(Dollars in thousands) Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate

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(Dollars in thousands)

Three months ended June 30, 2022 2021 Change

Three months ended September 30, 2022 2021 Change

Commercial loans $317 $205 $112

Six months ended June 30, 2022 2021 Change

Nine months ended September 30, 2022 2021 Change

(Dollars in thousands) Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate Average Balance Interest Yield/ Rate

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Net interest income (FTE)

$115,486 $104,369 $11,117

Interest rate spread 2.58 2.45 0.13

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(Dollars in thousands)

Six months ended June 30, 2022 2021 Change

Nine months ended September 30, 2022 2021 Change

Commercial loans $838 $674 $164

Net Interest Income

Net interest income, the primary source of our operating income, totaled $37.5 million and $72.6 million, respectively, for the three and six months ended June 30, 2022, compared to $34.8 million and $67.6 million, respectively, for the same periods in 2021.

Net interest income, the primary source of our operating income, totaled $42.0 million and $114.6 million, respectively, for the three and nine months ended September 30, 2022, compared to $36.1 million and $103.7 million, respectively, for the same periods in 2021.

Net interest income is affected by the level of and changes in interest rates, and changes in the amount and composition of interest-earning assets and interest-bearing liabilities.

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The following discussion presents net interest income on an FTE basis by adjusting income and yields on tax-exempt loans and securities to be comparable to taxable loans and securities.

The analysis of net interest income, NIM and the yield on loans may be impacted by the periodic recognition of prepayment penalty fee income associated with loan payoffs.

Prepayment penalty fee income associated with loan payoffs amounted to $62 thousand (or 0 basis point benefit to NIM) and $138 thousand (or 0 basis point benefit to NIM), respectively, for the three and six months ended June 30, 2022, compared to $717 thousand (or 5 basis points benefit to NIM) and $934 thousand (or 4 basis points benefit to NIM), respectively, for the same periods in 2021.

The analysis of net interest income, NIM and the yield on loans may be impacted by the periodic recognition of prepayment penalty fee income associated with commercial loan payoffs.

Prepayment penalty fee income amounted to $30 thousand (or 0 basis point benefit to NIM) and $168 thousand (or 1 basis point benefit to NIM), respectively, for the three and nine months ended September 30, 2022.

There was no prepayment penalty fee income recognized in the third quarter of 2021 and $934 thousand (or 2 basis points benefit to NIM) recognized in the nine months ended September 30, 2021.

The analysis of net interest income, NIM and the yield on loans is also impacted by changes in the level of net amortization of premiums and discounts on securities and loans, which is included in interest income.

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Changes in prepayment speeds could increase or decrease the level of net amortization of premiums and discounts, thereby affecting interest income.

Additionally, as PPP loans are forgiven by the SBA, related unamortized net fee balances are accelerated and amortized, increasing net interest income.

As noted in the Unaudited Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to interest income) amounted to $1.8 million for the six months ended June 30, 2022, compared $2.4 million for the same period in 2021.

Accelerated amortization of net deferred fee balances on PPP loans forgiven by the SBA amounted to $323 thousand (or 2 basis points benefit to NIM) and $1.1 million (or 4 basis points benefit to NIM), respectively, for the three and six months ended June 30, 2022, compared to $1.0 million (or 7 basis points benefit to NIM) and $2.2 million (or 9 basis points benefit to NIM), respectively, for the same periods in 2021.

FTE net interest income for the three and six months ended June 30, 2022 amounted to $37.8 million and $73.1 million, respectively, up by $2.8 million and $5.0 million, respectively, from the same periods in 2021.

In the three months ended June 30, 2022, increases in asset yields outpaced increases in funding costs, contributing $2.0 million of net interest income.

In the six months ended June 30, 2022, increases in asset yields and declines in funding costs contributed $3.4 million of net interest income.

In addition, growth in average interest-earning assets and declines in average interest-bearing liability balances contributed approximately $806 thousand and $1.7 million, respectively, of net interest income for the three and six months ended June 30, 2022.

NIM was 2.71% and 2.64%, respectively, for the three and six months ended June 30, 2022, compared to 2.55% and 2.53%, respectively, for the same periods in 2021 as NIM benefited from higher market interest rates.

Total average securities for the three and six months ended June 30, 2022 increased by $66.7 million and $111.0 million, respectively, from the average balances for the same periods a year earlier.

The FTE rate of return on the securities portfolio for the three and six months ended June 30, 2022 was 1.80% and 1.70%, respectively, compared to 1.34% and 1.38%, respectively, for the same periods in 2021, reflecting the impact of higher market interest rates in 2022.

Total average loan balances for the three and six months ended June 30, 2022 increased by $108.8 million and $90.9 million, respectively, from the average loan balances for the comparable 2021 periods.

The increase reflected growth in average

Additionally, as PPP loans were forgiven by the SBA, related unamortized net fee balances were accelerated and amortized, increasing net interest income.

As noted in the Unaudited Consolidated Statements of Cash Flows, net amortization of premiums and discounts on securities and loans (a net reduction to interest income) amounted to $2.5 million for the nine months ended September 30, 2022, compared $2.7 million for the same period in 2021.

Accelerated amortization of net deferred fee balances on PPP loans forgiven by the SBA amounted to $21 thousand (or 0 basis point benefit to NIM) and $1.2 million (or 3 basis points benefit to NIM), respectively, for the three and nine months ended September 30, 2022.

This compared to $2.0 million (or 13 basis points benefit to NIM) and $4.3 million (or 11 basis points benefit to NIM), respectively, for the same periods in 2021.

FTE net interest income for the three and nine months ended September 30, 2022 amounted to $42.4 million and $115.5 million, respectively, up by $6.1 million and $11.1 million, respectively, from the same periods in 2021.

Increases in asset yields outpaced increases in funding costs, contributing $4.3 million and $6.9 million, respectively, of net interest income for the three and nine months ended September 30, 2022.

In the three months ended September 30, 2022, growth in average interest-earning assets, net of increased average interest-bearing liability balances, contributed approximately $1.8 million of net interest income.

In the nine months ended September 30, 2022, growth in average interest-earning assets and declines in average interest-bearing liability balances contributed approximately $4.2 million of net interest income.

NIM was 2.82% and 2.71%, respectively, for the three and nine months ended September 30, 2022, compared to 2.58% and 2.55%, respectively, for the same periods in 2021 as NIM benefited from higher market interest rates.

Total average securities for the three and nine months ended September 30, 2022 increased by $104.7 million and $108.9 million, respectively, from the average balances for the same periods a year earlier.

The FTE rate of return on the securities portfolio for the three and nine months ended September 30, 2022 was 2.09% and 1.84%, respectively, compared to 1.40% and 1.39%, respectively, for the same periods in 2021, reflecting the impact of higher market interest rates in 2022.

Total average loan balances for the three and nine months ended September 30, 2022 increased by $371.8 million and $185.5 million, respectively, from the average loan balances for the comparable 2021 periods.

The increase reflected growth

Management's Discussion and Analysis

residential real estate loan balances, partially offset by a decline in commercial loans including PPP loans that were forgiven by the SBA.

The yield on total loans for the three and six months ended June 30, 2022 was 3.40% and 3.32%, respectively, compared to 3.32% in each of the corresponding periods in 2021.

The yield on total loans benefited from accelerated amortization of net deferred fee balances on PPP loans that were forgiven by the SBA and commercial loan prepayment fee income.

Excluding the impact of these items for both periods, the yield on total loans for the three and six months ended June 30, 2022 was 3.37% and 3.26%, respectively, up from 3.15% and 3.17%.

respectively, for the same periods in 2021, reflecting higher market interest rates.

The yield on total loans was also impacted by an elevated level of refinancing activity in 2021 that resulted in payoffs of higher yielding residential real estate loans.

The average balance of FHLB advances for the three and six months ended June 30, 2022 decreased by $304.9 million and $348.1 million, respectively, compared to the average balances for the same periods in 2021.

The average rate paid on such advances for the three months ended June 30, 2022 was 1.09%, up from 0.88% for the same period in 2021, reflecting recent increases in market interest rates.

The average rate paid on such advances for the six months ended June 30, 2022 was 0.88%, down from 0.96% for the same period in 2021, reflecting maturities and prepayments of higher-yielding FHLB advances, which were prepaid in the first half of 2021.

in average residential real estate loan balances, partially offset by a decline in commercial & industrial loans due to PPP loans that were forgiven by the SBA.

The yield on total loans for the three and nine months ended September 30, 2022 was 3.87% and 3.52%, respectively, compared to 3.33% and 3.32%, respectively, in the corresponding periods in 2021.

The yield on total loans may be impacted by the periodic recognition of commercial loan prepayment fee income, as well as the accelerated amortization of net deferred fee balances on PPP loans when such loans were forgiven by the SBA.

Excluding the impact of these items for both periods, the yield on total loans for the three and nine months ended September 30, 2022 was 3.87% and 3.48%, respectively, up from 3.14% and 3.16%, respectively, for the same periods in 2021, reflecting higher market interest rates.

The average balance of FHLB advances for the three and nine months ended September 30, 2022 increased by $232.0 million and decreased by $152.6 million, respectively, compared to the average balances for the same periods in 2021.

The average rate paid on such advances for the three and nine months ended September 30, 2022 was 2.33% and 1.82%, respectively, up from 1.09% and 0.99%, respectively, for the same periods in 2021, reflecting recent increases in market interest rates.

Included in total average interest-bearing deposits were wholesale brokered deposits, which decreased by $309.2 million and $241.5 million, respectively, from the same periods in 2021.

The average rate paid on wholesale brokered deposits for the three and six months ended June 30, 2022 was 0.41% and 0.28%, respectively, compared to 0.17% and 0.24%, respectively, for the same periods in 2021, reflecting recent increases in market interest rates.

Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, for the three and six months ended June 30, 2022 increased by $677.9 million and $659.2 million, respectively, from the average balances for the same periods in 2021.

The average rate paid on wholesale brokered deposits for the three and nine months ended September 30, 2022 was 1.26% and 0.61%, respectively, compared to 0.14% and 0.20%, respectively, for the same periods in 2021, reflecting recent increases in market interest rates.

Average in-market interest-bearing deposits, which excludes wholesale brokered deposits, for the three and nine months ended September 30, 2022 increased by $449.9 million and $588.7 million, respectively, from the average balances for the same periods in 2021.

The increases reflected growth across all deposit categories.

The average rate paid on in-market interest-bearing deposits for the three months ended June 30, 2022 increased by 3 basis points from the same period in 2021, reflecting recent increases in market interest rates.

The average rate paid on in-market interest-bearing deposits for the six months ended June 30, 2022 decreased by 4 basis points from the same period in 2021, largely due to downward repricing of interest-bearing in-market time deposits resulting from maturities of higher rate promotional time deposits.

The average balance of noninterest-bearing demand deposits for the three and six months ended June 30, 2022 decreased by $20.4 million and increased by $14.4 million, respectively, from the average balance for the same periods in 2021.

The average rate paid on in-market interest-bearing deposits for the three and nine months ended September 30, 2022 increased by 27 basis points and 7 basis points, respectively, from the same periods in 2021, reflecting recent increases in market interest rates.

The average balance of noninterest-bearing demand deposits for the three and nine months ended September 30, 2022 decreased by $8.5 million and increased by $6.7 million, respectively, from the average balance for the same periods in 2021.

Management's Discussion and Analysis

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The net change attributable to both volume and rate has been allocated proportionately.

(Dollars in thousands) Three Months Ended June 30, 2022 vs.

2021 Six Months Ended June 30, 2022 vs.

(Dollars in thousands) Three Months Ended September 30, 2022 vs.

2021 Nine Months Ended September 30, 2022 vs.

Change Due to Change Due to

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Estimating an appropriate level of ACL necessarily involves a high degree of judgment.

The Corporation recorded a negative provision for credit losses (or a benefit) of $3.0 million for the three months ended June 30, 2022, compared to no provision for the same period in 2021, For the six months ended June 30, 2022, the Corporation recorded a negative provision for credit losses (or a benefit) of $2.9 million, compared to a negative provision (or a benefit) of $2.0 million for the same period in 2021.

The negative provision in 2022 reflected a continuation of low loss rates, strong asset and credit quality metrics, as well as our current estimate of forecasted economic conditions.

The Corporation recorded a positive provision for credit losses (or a charge) of $800 thousand for the three months ended September 30, 2022, compared to no provision for credit losses recognized in the third quarter of 2021.

On a year-to-date basis, the Corporation recognized a negative provision for credit losses (or a benefit) of $2.1 million in 2022, compared to a negative provision (or a benefit) of $2.0 million in 2021.

The year-to-date negative provision recognized in 2022 was reflective of low loss rates, strong asset and credit quality metrics, our current estimate of forecasted economic conditions, and also provided for loan growth.

The year-to-date negative provision recorded in 2021 largely reflected an improvement in

Management's Discussion and Analysis

provision in 2021 reflected an improvement in forecasted economic conditions following higher credit provisioning in 2020, which was attributable to the emergence of the COVID-19 pandemic.

Net recoveries totaled $10 thousand and $158 thousand, respectively, in the three and six months ended June 30, 2022, compared to net charge-offs of $258 thousand and $276 thousand, respectively, for the same periods in 2021.

The ACL on loans was $36.3 million, or 0.81% of total loans, at June 30, 2022, compared to an ACL on loans of $39.1 million, or 0.91% of total loans, at December 31, 2021.

forecasted economic conditions following higher credit provisioning in 2020, which was attributable to the emergence of the COVID-19 pandemic.

Net charge-offs totaled $54 thousand for the three months ended September 30, 2022, compared to $168 thousand for the same period in 2021.

Net recoveries totaled $104 thousand for the nine months ended September 30, 2022, compared to net charge-offs of $444 thousand for the same period in 2021.

The ACL on loans was $36.9 million, or 0.76% of total loans, at September 30, 2022, compared to an ACL on loans of $39.1 million, or 0.91% of total loans, at December 31, 2021.

See additional discussion under the caption “Asset Quality” for further information on the ACL on loans.

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The principal categories of noninterest income are shown in the following table:

(Dollars in thousands) Three Months Six Months

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended June 30, 2022 2021 $ % 2022 2021 $ %

Periods ended September 30, 2022 2021 $ % 2022 2021 $ %

Noninterest income:

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Noninterest Income Analysis

Revenue from wealth management services represented 62% of total noninterest income for the six months ended June 30, 2022, compared to 44% for the same period in 2021.

Revenue from wealth management services represented 62% of total noninterest income for the nine months ended September 30, 2022, compared to 46% for the same period in 2021.

A substantial portion of wealth management revenues is dependent on the value of wealth management AUA and is closely tied to the performance of the financial markets.

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The categories of wealth management revenues are shown in the following table:

(Dollars in thousands) Three Months Six Months

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended June 30, 2022 2021 $ % 2022 2021 $ %

Periods ended September 30, 2022 2021 $ % 2022 2021 $ %

Wealth management revenues:

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Total wealth management revenues $9,525 $10,455 ($930) (9 %) $30,122 $30,778 ($656) (2 %)

Wealth management revenues for the three months ended June 30, 2022 decreased by $362 thousand, or 3%, from the same period in 2021, reflecting a decrease in asset-based revenues.

Wealth management revenues for the for the six months ended June 30, 2022 increased by $274 thousand, or 1% from the comparable period in 2021, reflecting growth in asset-based revenues.

Wealth management revenues for the three and nine months ended September 30, 2022 decreased by $930 thousand and $656 thousand, respectively, from the same periods in 2021, reflecting decreases in asset-based revenues.

The change in asset-based revenues correlated with the change in average AUA balances.

The average balance of AUA for the three months ended June 30, 2022 decreased by approximately 3% from the average balance for the same period

The average balance of AUA for the three and nine months ended September 30, 2022 decreased by approximately 11% and 2%, respectively, from the average balance for the same periods in 2021.

Management's Discussion and Analysis

For the six months ended June 30, 2022, the average balance of AUA increased by 2% from the average balance for the same period in 2021.

The following table presents the changes in wealth management AUA balances:

(Dollars in thousands)

Three Months Six Months

Periods ended June 30, 2022 2021 2022 2021

Three Months Nine Months

Periods ended September 30, 2022 2021 2022 2021

Wealth management assets under administration:

Balance at the beginning of period $6,650,097 $7,441,519 $7,784,211 $6,866,737

Net investment appreciation (depreciation) & income (816,290) 368,383 (1,205,023) 577,336

Net client asset inflows (outflows) (26,506) 23,910 70,909 (2,554)

Net investment (depreciation) appreciation & income (239,762) (4,830) (1,444,785) 572,506

Net client asset (outflows) inflows (87,578) 6,707 (16,669) 4,153

Balance at the end of period $6,322,757 $7,443,396 $6,322,757 $7,443,396

Wealth management AUA amounted to $6.7 billion at June 30, 2022.

Wealth management AUA amounted to $6.3 billion at September 30, 2022.

Wealth management AUA balances declined in 2022, primarily due to net investment depreciation as a result of recent declines in the financial markets.

Mortgage banking revenues represented 17% of total noninterest income for the six months ended June 30, 2022, compared to 38% for the same period in 2021.

Recently, four client-facing wealth management advisors in our registered investment adviser subsidiary resigned.

These four employees were associated with approximately $1.0 billion of AUA as of September 30, 2022.

From October 1, 2022 through November 4, 2022, we have been notified of client AUA withdrawals of approximately $546 million.

We estimate a decline in annual revenues of approximately $3.2 million associated with these withdrawals.

Washington Trust could experience additional AUA outflows in upcoming months associated with the departure of the former advisors.

Mortgage banking revenues represented 16% of total noninterest income for the nine months ended September 30, 2022, compared to 36% for the same period in 2021.

These revenues are dependent on mortgage origination volume and are sensitive to interest rates and the condition of housing markets.

The composition of mortgage banking revenues and the volume of loans sold to the secondary market are shown in the following table:

(Dollars in thousands) Three Months Six Months

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended June 30, 2022 2021 $ % 2022 2021 $ %

Periods ended September 30, 2022 2021 $ % 2022 2021 $ %

Mortgage banking revenues:

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(4) Includes brokered loans (loans originated for others).

For the three and six months ended June 30, 2022, mortgage banking revenues were down by $3.9 million and $12.3 million, respectively, compared to the same periods in 2021.

The decline in mortgage banking revenues was mainly attributable to a decline in sales volume and a reduction in the sales yield from the previously elevated level in the first half of 2021.

Mortgage loans sold to the secondary market totaled $79.7 million and $209.9 million, respectively, for the three and six months ended June 30, 2022, compared to $290.6 million and $582.6 million, respectively, for the same periods in 2021, reflecting an overall reduction in mortgage origination and sales activity, as well as a shift to a higher proportion of loans originated for retention in portfolio in 2022.

The decline in mortgage banking revenues was partially offset by changes in the fair value of mortgage loans held for sale and forward loan commitments, which are primarily based on current market prices in the secondary market and correlate to changes in the size of the mortgage pipeline.

For the three and nine months ended September 30, 2022, mortgage banking revenues were down by $4.3 million and $16.7 million, respectively, compared to the same periods in 2021.

The decline in mortgage banking revenues was mainly attributable to a decline in sales volume and a reduction in the sales yield.

Mortgage loans sold to the secondary market totaled $75.3 million and $285.2 million, respectively, for the three and nine months ended September 30, 2022, compared to $173.9 million and $756.4 million, respectively, for the same periods in 2021, reflecting an overall reduction in mortgage origination and sales activity, as well as a shift to a higher proportion of loans originated for retention in portfolio in 2022.

Mortgage banking revenues were also impacted by changes in the fair value of mortgage loans held for sale and forward loan commitments, which are primarily based on current market prices in the secondary market and correlate to changes in the size of the mortgage pipeline.

In addition, the decline in mortgage banking revenues was partially offset by higher net loan servicing fee income associated with loans sold with servicing retained.

The increase in net loan servicing fee income was largely due to lower amortization of servicing rights, reflecting lower prepayment speeds on the serviced mortgage portfolio.

For the three and six months ended June 30, 2022, loan related derivative income decreased by $506 thousand and $672 thousand, respectively, from the comparable periods in 2021, reflecting changes in fair value of loan related derivative contracts.

Management's Discussion and Analysis

Other income for the six months ended June 30, 2022 decreased by $1.1 million from the same period in 2021, due to $1.0 million of income associated with a litigation settlement that was recognized in the first quarter of 2021.

Other income for the nine months ended September 30, 2022 decreased by $1.1 million from the same period in 2021, due to $1.0 million of income associated with a litigation settlement that was recognized in the first quarter of 2021.

Noninterest Expense

The following table presents noninterest expense comparisons:

(Dollars in thousands) Three Months Six Months

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended June 30, 2022 2021 $ % 2022 2021 $ %

Periods ended September 30, 2022 2021 $ % 2022 2021 $ %

Noninterest expense:

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Noninterest Expense Analysis

Salaries and employee benefits expense for the three and six months ended June 30, 2022 decreased by $1.7 million and $2.2 million, respectively, compared to the same periods in 2021.

This reflected volume-related decreases in mortgage originator compensation expense and lower performance and share-based compensation accruals, partially offset by annual merit increases.

Debt prepayment penalty expense for the three and six months ended June 30, 2021 totaled $895 thousand and $4.2 million, due to the prepayment of higher-yielding FHLB advances.

There were no such debt prepayments in the comparable periods in 2022.

Salaries and employee benefits expense, the largest component of noninterest expense, for the three and nine months ended September 30, 2022 decreased by $553 thousand and $2.8 million, respectively, compared to the same periods in 2021.

This included volume-related decreases in mortgage originator compensation expense, annual merit increases and higher staffing levels.

Debt prepayment penalty expense for the nine months ended September 30, 2021 totaled $4.2 million, due to the prepayment of higher-yielding FHLB advances.

There were no such debt prepayments in the comparable period in 2022.

Other expense for the three and nine months ended September 30, 2022 increased by $674 thousand and $814 thousand, respectively, compared to the same periods in 2021, reflecting modest increases across a variety of other noninterest expense categories.

The following table presents the Corporation’s income tax provision and applicable tax rates for the periods indicated:

(Dollars in thousands)

Three Months Six Months

Periods ended June 30, 2022 2021 2022 2021

Three Months Nine Months

Periods ended September 30, 2022 2021 2022 2021

Income tax expense $5,310 $5,319 $15,091 $15,855

Effective income tax rate 22.1 % 22.1 % 21.5 % 21.9 %

The effective income tax rates for the three and six months ended June 30, 2022 and 2021 differed from the federal rate of 21%, primarily due to state income tax expense, partially offset by the benefits of tax-exempt income, income from BOLI, federal tax credits and the recognition of excess tax expense or benefits associated with the settlement of share-based awards.

The decrease in the effective tax rate for the three and six months ended June 30, 2022 compared to the same periods in 2021 largely reflected an increase in benefits from federal tax credits and a decrease in state tax expense, partially offset by a decrease in benefits from tax-exempt income.

The Corporation’s net deferred tax assets amounted to $45.1 million at June 30, 2022, compared to $14.0 million at December 31, 2021.

The Corporation has determined that a valuation allowance is not required for any of the deferred tax assets since it is more-likely-than-not that these assets will be realized primarily through future reversals of existing taxable

The effective income tax rates for the three and nine months ended September 30, 2022 and 2021 differed from the federal rate of 21%, primarily due to state income tax expense, partially offset by the benefits of tax-exempt income, income from BOLI, federal tax credits and the recognition of excess tax expense or benefits associated with the settlement of share-based awards.

Management's Discussion and Analysis

temporary differences or by offsetting projected future taxable income.

Net deferred tax assets increased in 2022, largely reflecting an increase in the deferred tax asset associated with the temporary decline in fair value of securities available for sale.

The decrease in the effective tax rate for the nine months ended September 30, 2022 compared to the same period in 2021 largely reflected an increase in benefits from federal tax credits and a decrease in state tax expense, partially offset by a decrease in benefits from tax-exempt income.

The Corporation’s net deferred tax assets amounted to $62.1 million at September 30, 2022, compared to $14.0 million at December 31, 2021.

Net deferred tax assets increased in 2022, largely reflecting increases in deferred tax assets associated with the declines in fair value of securities available for sale and cash flow hedges that were primarily attributable to relative changes in market interest rates.

Segment Reporting

3 unchanged sentences

The following table presents a summarized statement of operations for the Commercial Banking business segment:

(Dollars in thousands) Three Months Six Months

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended June 30, 2022 2021 $ % 2022 2021 $ %

Periods ended September 30, 2022 2021 $ % 2022 2021 $ %

Net interest income $42,038 $36,085 $5,953 16 % $114,709 $103,737 $10,972 11 %

7 unchanged sentences

Net income $17,657 $17,044 $613 4 % $50,282 $50,429 ($147) — %

Net interest income for the Commercial Banking segment for the three and six months ended June 30, 2022, increased by $2.8 million and $5.0 million, respectively, from the same periods in 2021.

Net interest income largely benefited from higher yields on and growth in average interest-earning assets, as well as a reduction in average wholesale funding balances.

The negative provision for credit losses recognized in three and six months ended June 30, 2022 reflected a continuation of low loss rates, strong asset and credit quality metrics, as well as our current estimate of forecasted economic conditions.

In 2021, the negative provision reflected an improvement in forecasted economic conditions following higher credit provisioning in 2020, which was attributable to the emergence of the COVID-19 pandemic.

Noninterest income derived from the Commercial Banking segment for the three and six months ended June 30, 2022 was down by $4.5 million and $12.9 million, respectively, from the comparable periods in 2021, primarily due to lower mortgage banking revenues.

Noninterest income also included a decline in loan related derivative income.

See additional discussion regarding mortgage banking revenues and loan related derivative income under the caption “Noninterest Income” above.

Commercial Banking noninterest expenses for the three and six months ended June 30, 2022 were down by $1.8 million and $5.7 million, respectively, from the same periods in 2021, largely reflecting decreases in debt prepayment penalties and salaries and employee benefits expense.

Net interest income for the Commercial Banking segment for the three and nine months ended September 30, 2022, increased by $6.0 million and $11.0 million, respectively, from the same periods in 2021.

Net interest income largely benefited from higher yields on and growth in average interest-earning assets, partially offset by a higher cost of funds.

The Corporation recorded a positive provision for credit losses (or a charge) of $800 thousand for the three months ended September 30, 2022, compared to no provision for the same period in 2021.

For the nine months ended September 30, 2022, the Corporation recorded a negative provision for credit losses (or a benefit) of $2.1 million, compared to a negative provision (or a benefit) of $2.0 million for the same period in 2021.

See additional discussion under the caption “Provision for Credit Losses.”

Noninterest income derived from the Commercial Banking segment for the three and nine months ended September 30, 2022 was down by $3.9 million and $16.9 million, respectively, from the comparable periods in 2021, primarily due to lower mortgage banking revenues.

See additional discussion regarding mortgage banking revenues under the caption “Noninterest Income” above.

Commercial Banking noninterest expenses for the three months ended September 30, 2022 were up by $468 thousand from the same period in 2021.

For the nine months ended September 30, 2022, noninterest expenses for the commercial banking segment were down by $5.3 million from the same period in 2021, largely reflecting decreases in debt prepayment penalties and salaries and employee benefits expense.

See additional discussion under the caption “Noninterest Expense” above.

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The following table presents a summarized statement of operations for the Wealth Management Services business segment:

(Dollars in thousands) Three Months Six Months

(Dollars in thousands) Three Months Nine Months

Change Change

Periods ended June 30, 2022 2021 $ % 2022 2021 $ %

Periods ended September 30, 2022 2021 $ % 2022 2021 $ %

Net interest expense $4 ($15) $19 127 % ($61) ($42) ($19) 45 %

4 unchanged sentences

Net income $1,011 $1,707 ($696) (41 %) $4,826 $6,253 ($1,427) (23 %)

For the three and six months ended June 30, 2022, noninterest income derived from the Wealth Management Services segment decreased by $281 thousand and $617 thousand, respectively, from the same periods in 2021.

The year-over-year decrease in second quarter noninterest income was due to a decrease in asset-based revenues.

The decline in year-to-date revenues was attributable to income of $1.0 million associated with a litigation settlement that was recognized in the first quarter of 2021.

For the three and nine months ended September 30, 2022, noninterest income derived from the Wealth Management Services segment decreased by $798 thousand and $1.4 million, respectively, from the same periods in 2021, reflecting a decrease in asset-based revenues.

The decline in year-to-date revenues also included income of $1.0 million associated with a litigation settlement that was recognized in the first quarter of 2021.

See further discussion under the caption “Noninterest Income” above.

For the three and six months ended June 30, 2022, noninterest expenses for the Wealth Management Services segment decreased by $136 thousand and increased by $291 thousand, respectively, from the comparable periods in 2021.

For the three and nine months ended September 30, 2022, noninterest expenses for the Wealth Management Services segment increased by $79 thousand and $370 thousand, respectively, from the comparable periods in 2021.

These included modest changes across a variety of noninterest expense categories.

2 unchanged sentences

(Dollars in thousands) Change

September 30,

2022 December 31,

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Total shareholders’ equity 432,274 564,808 (132,534) (23)

Total assets amounted to $6.0 billion at June 30, 2022, up by $131.8 million, or 2%, from the end of 2021.

Total assets amounted to $6.4 billion at September 30, 2022, up by $556.9 million, or 10%, from the end of 2021, due to loan growth.

Cash and due from banks balances declined by $45.2 million, or 26%, from the end of 2021, including a reduction in cash collateral pledged to derivative counterparties and lower cash balances with correspondent banks.

1 unchanged sentence

The securities portfolio decreased by $60.3 million, or 6%, from the end of 2021, reflecting a temporary decline in fair value and routine pay-downs on mortgage-backed securities, partially offset by purchases of debt securities.

Total loans increased by $206.9 million, or 5%, from the end of 2021, as loan originations were partially offset by payoffs, pay-downs and PPP loans that were forgiven by the SBA.

Total loans increased by $575.9 million, or 13%, from the end of 2021, led by growth in the residential real estate portfolio.

Management's Discussion and Analysis

1 unchanged sentence

FHLB advances increased by $555.0 million, or 383%, from December 31, 2021.

Higher levels of wholesale funding were utilized to fund balance sheet growth.

Shareholders’ equity decreased by $88.2 million, or 16%, largely reflecting a decline in the AOCL component of shareholders' equity due to a temporary decrease in the fair value of available for sale securities and cash flow hedges.

Higher levels of wholesale funding were utilized to fund loan growth and purchases of debt securities.

Shareholders’ equity decreased by $132.5 million, or 23%, largely reflecting a decline in the AOCL component of shareholders' equity due to decreases in the fair value of available for sale debt securities and cash flow hedges that were primarily attributable to relative changes in market interest rates.

I nvestment security activity is monitored by the Investment Committee, the members of which also sit on the ALCO.

16 unchanged sentences

In addition, management periodically performs independent price tests of securities to ensure proper valuation and to verify our understanding of how securities are priced.

As of June 30, 2022 and December 31, 2021, management did not make any adjustments to the prices provided by the pricing service.

As of September 30, 2022 and December 31, 2021, management did not make any adjustments to the prices provided by the pricing service.

Our fair value measurements generally utilize Level 2 inputs, representing quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, and model-derived valuations in which all significant input assumptions are observable in active markets.

3 unchanged sentences

The carrying amounts of securities held are as follows:

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Amount % Amount %

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Total available for sale debt securities $982,573 100 % $1,042,859 100 %

The securities portfolio amounted to $1.0 billion, or 17% of total assets, as of June 30, 2022 compared to $1.0 billion, or 18% of total assets, as of December 31, 2021.

The securities portfolio amounted to $1.0 billion, or 15% of total assets, as of September 30, 2022 compared to $1.0 billion, or 18% of total assets, as of December 31, 2021.

The largest component of the securities portfolio is mortgage-backed securities, all of which are issued by U.S.

5 unchanged sentences

government-sponsored debt securities, including mortgage-backed securities, totaling $214.6 million, with a weighted average yield of 3.45%.

The carrying amount of available for sale debt securities included net unrealized losses of $121.3 million and $8.9 million, respectively, as of June 30, 2022 and December 31, 2021.

The carrying amount of available for sale debt securities included net unrealized losses of $183.2 million and $8.9 million, respectively, as of September 30, 2022 and December 31, 2021.

The decline in fair value of available for sale debt securities from the end of 2021 was primarily concentrated in obligations of U.S.

government agencies and U.S.

government-sponsored enterprises, including mortgage-backed securities, and attributable to relative changes in interest rates since the time of purchase.

government-sponsored enterprises, including mortgage-backed securities, and primarily attributable to relative changes in interest rates since the time of purchase.

See Note 3 to the Unaudited Consolidated Financial Statements for additional information.

Total loans amounted to $4.5 billion at June 30, 2022, up by $206.9 million, or 4.8%, from the end of 2021, reflecting growth in the residential real estate portfolio partially offset by a decline in the commercial loan portfolio.

Total loans amounted to $4.8 billion at September 30, 2022, up by $575.9 million, or 13.5%, from the end of 2021, led by growth in the residential real estate portfolio.

The following is a summary of loans:

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Amount % Amount %

25 unchanged sentences

Commercial Loans

The commercial loan portfolio represented 50% of total loans at June 30, 2022.

The commercial loan portfolio represented 50% of total loans at September 30, 2022.

In making commercial loans, we may occasionally solicit the participation of other banks.

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In such cases, these loans are individually underwritten by us using standards similar to those employed for our self-originated loans.

Our participation in commercial loans originated by other banks amounted to $445.8 million and $451.6 million, respectively, at June 30, 2022 and December 31, 2021.

Our participation in commercial loans originated by other banks amounted to $431.9 million and $451.6 million, respectively, at September 30, 2022 and December 31, 2021.

Our participation in commercial loans originated by other banks also includes shared national credits.

Shared national credits are defined as participation in loans or loan commitments of at least $100.0 million that are shared by three or more banks.

Commercial loans fall into two main categories, commercial real estate and commercial and industrial loans.

Commercial real estate loans consist of commercial mortgages secured by real property where the primary source of repayment is derived from rental income associated with the property or the proceeds of the sale, refinancing or permanent financing of the property.

Commercial real estate loans also include construction loans made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings.

Commercial and industrial loans primarily provide working capital, equipment financing and financing for other business-related purposes.

Commercial and industrial loans are frequently collateralized by equipment, inventory, accounts receivable, and/or general business assets.

A portion of the Bank’s commercial and industrial loans is also collateralized by real estate.

Commercial and industrial loans also include PPP loans that are fully guaranteed by the U.S.

Commercial loans fall into two main categories, CRE and C&I loans.

CRE loans consist of commercial mortgages secured by real property where the primary source of repayment is derived from rental income associated with the property or the proceeds of the sale, refinancing or permanent financing of the property.

CRE loans also include construction loans made to businesses for land development or the on-site construction of industrial, commercial, or residential buildings.

C&I loans primarily provide working capital, equipment financing and financing for other business-related purposes.

C&I loans are frequently collateralized by equipment, inventory, accounts receivable, and/or general business assets.

A portion of the Bank’s C&I loans is also collateralized by real estate.

C&I loans also include PPP loans that are fully guaranteed by the U.S.

government, tax-exempt loans made to states and political subdivisions, as well as industrial development or revenue bonds issued through quasi-public corporations for the benefit of a private or non-profit entity where that entity rather than the governmental entity is obligated to pay the debt service.

Commercial Real Estate Loans

CRE loans totaled $1.6 billion at June 30, 2022, down by $29.4 million, or 2%, from the balance at December 31, 2021.

Included in CRE loans were construction and development loans with carrying values of $107.6 million and $122.4 million, respectively, as of June 30, 2022 and December 31, 2021.

For the six months ended June 30, 2022, CRE payoffs and pay-downs of approximately $220 million were partially offset by loan originations and advances.

Shared national credit balances outstanding included in the CRE loan portfolio totaled $6.0 million at June 30, 2022.

The balance was included in the pass-rated category of commercial loan credit quality and current with respect to contractual payment terms at June 30, 2022.

CRE loans totaled $1.8 billion at September 30, 2022, up by $123.6 million, or 8%, from the balance at December 31, 2021.

Loan originations and advances of approximately $420 million were partially offset by payoffs and pay-downs.

Included in CRE loans were construction and development loans with carrying values of $118.3 million and $122.4 million, respectively, as of September 30, 2022 and December 31, 2021.

Shared national credit balances outstanding included in the CRE loan portfolio totaled $8.1 million at September 30, 2022.

The balance was included in the pass-rated category of commercial loan credit quality and current with respect to contractual payment terms at September 30, 2022.

The following table presents a summary of CRE loans by property location:

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Outstanding Balance % of Total Outstanding Balance % of Total

7 unchanged sentences

The following table presents a summary of CRE loans by property type segmentation:

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Count Outstanding Balance % of Total Count Outstanding Balance % of Total

CRE Portfolio Segmentation:

Multi-family dwelling 125 $428,883 27 % 127 $474,229 29 %

Retail 109 $441,631 25 % 121 $389,487 24 %

Multi-family dwelling 123 429,796 24 127 474,229 29

Office 55 253,816 14 57 216,602 13

11 unchanged sentences

Commercial and Industrial Loans

C&I loans amounted to $620.3 million at June 30, 2022, down by $21.3 million, or 3%, from the balance at December 31, 2021.

This included a net reduction in PPP loans of $36.1 million.

C&I loans amounted to $652.8 million at September 30, 2022, up by $11.2 million, or 2%, from the balance at December 31, 2021.

This included a net reduction in PPP loans of $36.6 million, reflecting loans forgiven by the SBA.

Excluding PPP loans, C&I loans increased by approximately $47.8 million, with loan originations and advances of $99 million, partially offset by payoffs and pay-downs.

As of June 30, 2022, the carrying value of PPP loans was $1.9 million and included net unamortized loan origination fee balances of $83 thousand.

As of September 30, 2022, the carrying value of PPP loans was $1.4 million and included net unamortized loan origination fee balances of $58 thousand.

The carrying value of PPP loans at December 31, 2021 was $38.0 million.

Shared national credit balances outstanding included in the C&I loan portfolio totaled $41.7 million at June 30, 2022.

All of these loans were included in the pass-rated category of commercial loan credit quality and were current with respect to contractual payment terms at June 30, 2022.

Shared national credit balances outstanding included in the C&I loan portfolio totaled $40.3 million at September 30, 2022.

All of these loans were included in the pass-rated category of commercial loan credit quality and were current with respect to contractual payment terms at September 30, 2022.

Management's Discussion and Analysis

The following table presents a summary of C&I loan by industry segmentation:

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Count Outstanding Balance % of Total Count Outstanding Balance % of Total

3 unchanged sentences

Manufacturing 54 55,489 9 65 55,341 9

Educational services 19 50,769 8 28 52,211 8

Transportation and warehousing

20 50,597 8 31 35,064 5

Retail 55 49,365 8 79 47,290 7

Educational services 20 48,208 7 28 52,211 8

Finance and insurance

58 31,579 5 59 31,279 5

Transportation and warehousing

24 33,709 5 31 35,064 5

Entertainment and recreation

13 unchanged sentences

Residential Real Estate Loans

The residential real estate loan portfolio represented 44% of total loans at June 30, 2022.

Residential real estate loans held in portfolio amounted to $2.0 billion at June 30, 2022, up by $239.4 million, or 14%, from the balance at December 31, 2021, reflecting a higher proportion of loans originated for portfolio.

The residential real estate loan portfolio represented 44% of total loans at September 30, 2022.

Residential real estate loans held in portfolio amounted to $2.1 billion at September 30, 2022, up by $417.1 million, or 24%, from the balance at December 31, 2021, reflecting a higher proportion of loans originated for portfolio in 2022.

The following is a summary of residential real estate mortgages by property location:

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Amount % of Total Amount % of Total

6 unchanged sentences

$2,144,098 100 % $1,726,975 100 %

(1) Includes residential mortgage loans purchased from and serviced by other financial institutions totaling $66.2 million and $78.7 million, respectively, as of June 30, 2022 and December 31, 2021.

(1) Includes residential mortgage loans purchased from and serviced by other financial institutions totaling $62.7 million and $78.7 million, respectively, as of September 30, 2022 and December 31, 2021.

Residential real estate loans are originated both for sale to the secondary market as well as for retention in the Bank’s loan portfolio.

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The table below presents residential real estate loan origination activity:

(Dollars in thousands) Three Months Six Months

Periods ended June 30, 2022 2021 2022 2021

(Dollars in thousands) Three Months Nine Months

Periods ended September 30, 2022 2021 2022 2021

Amount % of Total Amount % of Total Amount % of Total Amount % of Total

6 unchanged sentences

(Dollars in thousands)

Three Months Six Months

Periods ended June 30, 2022 2021 2022 2021

Three Months Nine Months

Periods ended September 30, 2022 2021 2022 2021

Amount % of Total Amount % of Total Amount % of Total Amount % of Total

8 unchanged sentences

Loan servicing rights are included in other assets and are subsequently amortized as an offset to mortgage banking revenues over the estimated period of servicing.

The net balance of capitalized servicing rights amounted to $9.2 million and $9.8 million, respectively, as of June 30, 2022 and December 31, 2021.

The balance of residential mortgage loans serviced for others, which are not included in the Unaudited Consolidated Balance Sheets, amounted to $1.5 billion as of both June 30, 2022 and December 31, 2021.

The net balance of capitalized servicing rights amounted to $9.2 million and $9.8 million, respectively, as of September 30, 2022 and December 31, 2021.

The balance of residential mortgage loans serviced for others, which are not included in the Unaudited Consolidated Balance Sheets, amounted to $1.5 billion as of both September 30, 2022 and December 31, 2021.

Consumer Loans

Consumer loans include home equity loans and lines of credit and personal installment loans.

Home equity lines of credit and home equity loans represented 94% of the total consumer portfolio at June 30, 2022.

Home equity lines of credit and home equity loans represented 95% of the total consumer portfolio at September 30, 2022.

Our home equity line and home equity loan origination activities are conducted primarily in southern New England.

The Bank estimates that approximately 55% of the combined home equity lines of credit and home equity loan balances are first lien positions or subordinate to other Washington Trust mortgages.

The consumer loan portfolio totaled $283.6 million at June 30, 2022, up by $18.3 million, or 7%, from December 31, 2021, reflecting increases in home equity lines and loans.

Purchased consumer loans, consisting of loans to individuals secured by general aviation aircraft, amounted to $9.1 million and $9.4 million, respectively, at June 30, 2022 and December 31, 2021.

The consumer loan portfolio totaled $289.3 million at September 30, 2022, up by $24.0 million, or 9%, from December 31, 2021, reflecting increases in home equity lines and loans.

Purchased consumer loans, consisting of loans to individuals secured by general aviation aircraft, amounted to $8.9 million and $9.4 million, respectively, at September 30, 2022 and December 31, 2021.

Management's Discussion and Analysis

1 unchanged sentence

Nonperforming Assets

Nonperforming assets include nonaccrual loans and property acquired through foreclosure or repossession.

Nonperforming assets include nonaccrual loans and OREO.

The following table presents nonperforming assets and additional asset quality data:

(Dollars in thousands) Jun 30,

(Dollars in thousands) Sep 30,

Commercial real estate $— $—

6 unchanged sentences

Total nonaccrual loans 12,122 14,203

Property acquired through foreclosure or repossession, net — —

Total nonperforming assets $12,122 $14,203

5 unchanged sentences

Nonaccrual Loans

During the six months ended June 30, 2022, the Corporation made no changes in its practices or policies concerning the placement of loans into nonaccrual status.

During the nine months ended September 30, 2022, the Corporation made no changes in its practices or policies concerning the placement of loans into nonaccrual status.

The following table presents the activity in nonaccrual loans:

(Dollars in thousands) Three Months Six Months

For the periods ended June 30, 2022 2021 2022 2021

(Dollars in thousands) Three Months Nine Months

For the periods ended September 30, 2022 2021 2022 2021

Balance at beginning of period $12,414 $10,481 $14,203 $13,197

6 unchanged sentences

The following table presents additional detail on nonaccrual loans:

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Days Past Due Days Past Due

13 unchanged sentences

(1) Percentage of nonaccrual loans to the total loans outstanding within the respective category.

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at June 30, 2022.

As of both June 30, 2022 and December 31, 2021, the composition of nonaccrual loans was 100% residential and consumer.

Nonaccrual residential real estate mortgage loans amounted to $11.8 million at June 30, 2022, down by $1.8 million from the end of 2021.

As of June 30, 2022, the balance of nonaccrual residential mortgage loans was predominately secured by properties in Massachusetts, Connecticut and Rhode Island.

Included in total nonaccrual residential real estate loans at June 30, 2022 were four loans purchased for portfolio and serviced by others amounting to $1.2 million.

There were no significant commitments to lend additional funds to borrowers whose loans were on nonaccrual status at September 30, 2022.

As of both September 30, 2022 and December 31, 2021, the composition of nonaccrual loans was 100% residential and consumer.

Nonaccrual residential real estate mortgage loans amounted to $11.7 million at September 30, 2022, down by $1.9 million from the end of 2021.

As of September 30, 2022, the balance of nonaccrual residential mortgage loans was predominately secured by properties in Massachusetts, Connecticut and Rhode Island.

Included in total nonaccrual residential real estate loans at September 30, 2022 were four loans purchased for portfolio and serviced by others amounting to $1.1 million.

Management monitors the collection efforts of its third party servicers as part of its assessment of the collectability of nonperforming loans.

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In years after the restructuring, a TDR is removed from this classification if the restructuring did not involve a below-market rate concession and the loan is performing in accordance with its modified contractual terms for a reasonable period of time.

As of June 30, 2022, there were no significant commitments to lend additional funds to borrowers whose loans had been restructured in a TDR.

As of September 30, 2022, there were no significant commitments to lend additional funds to borrowers whose loans had been restructured in a TDR.

See Note 2 for discussion on ASU No.

2022-02, a recently issued accounting pronouncement that is pending adoption.

2022-02, which becomes effective on January 1, 2023, updates the accounting treatment and related disclosure requirements for TDRs.

As noted above under the caption “Loans,” the Corporation elected to account for eligible loan

Management's Discussion and Analysis

modifications under Section 4013 of the CARES Act, as amended by the CRRSA Act.

2022-02, which becomes effective on January 1, 2023, updates the accounting treatment and related disclosure requirements for TDRs.

As noted above under the caption “Loans,” the Corporation elected to account for eligible loan modifications under Section 4013 of the CARES Act, as amended by the CRRSA Act.

Loan modifications that did not qualify for the TDR accounting relief provided under the CARES Act were classified as TDRs.

2 unchanged sentences

Accrued interest is not included in the carrying amounts set forth below.

(Dollars in thousands) Jun 30,

(Dollars in thousands) Sep 30,

Accruing TDRs

16 unchanged sentences

Total TDRs $10,104 $19,147

As of June 30, 2022 and December 31, 2021, the composition of TDRs was 55% commercial and 45% residential and consumer, compared to 70% commercial and 30% residential and consumer at December 31, 2021.

TDRs amounted to $12.5 million at June 30, 2022, down by $6.6 million from the end of 2021, largely due to a pay-down on one CRE TDR loan.

The ACL included specific reserves for TDRs of $143 thousand at June 30, 2022, compared to $148 thousand at December 31, 2021.

As of September 30, 2022, the composition of TDRs was 44% commercial and 56% residential and consumer, compared to 70% commercial and 30% residential and consumer at December 31, 2021.

TDRs amounted to $10.1 million at September 30, 2022, down by $9.0 million from the end of 2021.

The net decline reflected a pay-down of $6.5 million on one accruing CRE TDR loan and the declassification from TDR status of one accruing C&I loan with a carrying value of $2.8 million that was declassified in accordance with policy.

The ACL included specific reserves for TDRs of $132 thousand at September 30, 2022, compared to $148 thousand at December 31, 2021.

Management's Discussion and Analysis

1 unchanged sentence

The following table presents past due loans by category:

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Commercial real estate $— — % $— — %

8 unchanged sentences

(1) Percentage of past due loans to the total loans outstanding within the respective category.

As of both June 30, 2022 and December 31, 2021, the composition of past due loans (loans past due 30 days or more) was 100% residential and consumer.

As of both September 30, 2022 and December 31, 2021, the composition of past due loans (loans past due 30 days or more) was essentially 100% residential and consumer.

Total past due loans decreased by $2.9 million from the end of 2021.

Total past due loans included $6.8 million of nonaccrual loans as of June 30, 2022, compared to $9.4 million as of December 31, 2021.

All loans 90 days or more past due at June 30, 2022 and December 31, 2021 were classified as nonaccrual.

Total past due loans included $7.1 million of nonaccrual loans as of September 30, 2022, compared to $9.4 million as of December 31, 2021.

All loans 90 days or more past due at September 30, 2022 and December 31, 2021 were classified as nonaccrual.

Potential Problem Loans

The Corporation classifies certain loans as “substandard,” “doubtful,” or “loss” based on criteria consistent with guidelines provided by banking regulators.

Potential problem loans include classified accruing commercial loans that were less than 90 days past due at June 30, 2022 and other loans for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future.

Potential problem loans include classified accruing commercial loans that were less than 90 days past due at September 30, 2022 and other loans for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future.

Potential problem loans are not included in the amounts of nonaccrual or TDRs presented above.

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Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual, become restructured, or require an increased allowance coverage and provision for credit losses on loans.

Management has identified two loans associated with one C&I relationship with carrying values totaling $741 thousand as potential problem loans at June 30, 2022.

These two loans were current with respect to payment terms at June 30, 2022.

Management has identified two loans associated with one C&I relationship with carrying values totaling $722 thousand as potential problem loans at September 30, 2022.

These two loans were current with respect to payment terms at September 30, 2022.

There were no potential problem loans identified at December 31, 2021.

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The Corporation’s general practice is to identify problem credits early and recognize full or partial charge-offs as promptly as practicable when it is determined that the collection of loan principal is unlikely.

Full or partial charge-offs on collateral dependent individually analyzed loans are recognized when the collateral is deemed to be insufficient to support the carrying value of the loan.

The Corporation does not recognize a recovery when new appraisals indicate a subsequent increase in value.

Full or partial charge-offs on collateral dependent individually analyzed loans are recognized when the collateral is deemed to be insufficient to support the carrying

Management's Discussion and Analysis

value of the loan.

The Corporation does not recognize a recovery when new appraisals indicate a subsequent increase in value.

Appraisals are generally obtained with values determined on an “as is” basis from independent appraisal firms for real estate collateral dependent commercial loans in the process of collection or when warranted by other deterioration in the borrower’s credit status.

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The following table presents additional detail on the Corporation’s loan portfolio and associated allowance:

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Loans Related Allowance Allowance / Loans Loans Related Allowance Allowance / Loans

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Quantitative loss factors for pooled loans are also supplemented by certain qualitative risk factors reflecting management’s view of how losses may vary from those represented by quantitative loss rates.

The ACL on loans amounted to $36.3 million at June 30, 2022, down by $2.8 million from the balance at December 31, 2021.

The ACL on loans as a percentage of total loans, also known as the reserve coverage ratio, was 0.81% at June 30, 2022, compared to 0.91% at December 31, 2021.

For the three and six months ended June 30, 2022, the Corporation recorded a negative provision for credit losses (of a benefit) of $3.0 million and $2.9 million, respectively, reflecting a continuation of low loss rates, strong asset and credit quality metrics, as well as our current estimate of forecasted economic conditions.

Net recoveries totaled $10 thousand and $158 thousand, respectively, for the three and six months ended June 30, 2022.

The ACL on loans amounted to $36.9 million at September 30, 2022, down by $2.2 million from the balance at December 31, 2021.

The ACL on loans as a percentage of total loans, also known as the reserve coverage ratio, was 0.76% at September 30, 2022, compared to 0.91% at December 31, 2021.

The Corporation recorded a positive provision for credit losses (or a charge) of $800 thousand for the three months ended September 30, 2022, compared to no provision for the same period in 2021.

On a year-to-date basis, the Corporation recognized a negative provision for credit losses (or a benefit) of $2.1 million, compared to a negative provision (or a benefit) of $2.0 million for the same period in 2021.

Net recoveries totaled $54 thousand and $104 thousand, respectively, for the three and nine months ended September 30, 2022.

Management's Discussion and Analysis

The ACL on loans is an estimate and ultimate losses may vary from management’s estimate.

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conversely, improving conditions or assumptions could lead to further reductions in the ACL on loans.

Management's Discussion and Analysis

The following table presents the allocation of the ACL on loans by portfolio segment.

The total ACL on loans is available to absorb losses from any segment of the loan portfolio.

(Dollars in thousands) June 30, 2022 December 31, 2021

(Dollars in thousands) September 30, 2022 December 31, 2021

Allocated ACL

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(Dollars in thousands) Change

September 30,

2022 December 31,

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In-market deposits were up by $161.9 million, or 4%, from the balance at December 31, 2021, while wholesale brokered deposits declined by $72.1 million, or 14%.

Total deposits amounted to $5.0 billion at June 30, 2022, up by $26.6 million, or 1%, from December 31, 2021.

Total deposits amounted to $5.1 billion at September 30, 2022, up by $89.8 million, or 2%, from December 31, 2021.

Borrowings primarily consist of FHLB advances, which are used as a source of funding for liquidity and interest rate risk management purposes.

FHLB advances totaled $328.0 million at June 30, 2022, up by $183.0 million, or 126%, from the balance at the end of 2021, as higher levels of wholesale funding were utilized to fund balance sheet growth.

FHLB advances totaled $700.0 million at September 30, 2022, up by $555.0 million, or 383%, from the balance at the end of 2021, as higher levels of wholesale funding were utilized to fund loan growth and purchases of debt securities.

For additional information regarding FHLB advances see Note 7 to the Unaudited Consolidated Financial Statements.

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Liquidity is the ability of a financial institution to meet maturing liability obligations and customer loan demand.

The Corporation’s primary source of liquidity is in-market deposits, which funded approximately 79% of total average assets in the six months ended June 30, 2022.

The Corporation’s primary source of liquidity is in-market deposits, which funded approximately 77% of total average assets in the nine months ended September 30, 2022.

While the generally preferred funding strategy is to attract and retain low-cost deposits, the ability to do so is affected by competitive interest rates and terms in the marketplace.

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(Dollars in thousands)

September 30,

2022 December 31,

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Total $1,663,549 $2,362,259

(1) As of June 30, 2022 and December 31, 2021, loans with a carrying value of $2.2 billion and $2.2 billion, respectively, and securities available for sale with carrying values of $114.1 million and $163.2 million, respectively, were pledged to the FHLB resulting in this additional borrowing capacity.

(2) As of June 30, 2022 and December 31, 2021, loans with a carrying value of $7.4 million and $8.2 million, respectively, and securities available for sale with a carrying value of $12.7 million and $13.5 million, respectively, were pledged to the FRBB for the discount window resulting in this additional unused borrowing capacity.

(1) As of September 30, 2022 and December 31, 2021, loans with a carrying value of $2.3 billion and $2.2 billion, respectively, and securities available for sale with carrying values of $121.4 million and $163.2 million, respectively, were pledged to the FHLB resulting in this additional borrowing capacity.

(2) As of September 30, 2022 and December 31, 2021, loans with a carrying value of $17.8 million and $8.2 million, respectively, and securities available for sale with a carrying value of $12.8 million and $13.5 million, respectively, were pledged to the FRBB for the discount window resulting in this additional unused borrowing capacity.

In addition to the amounts presented above, the Bank also had access to a $40.0 million unused line of credit with the FHLB, as well as a $102.0 million standby letter of credit with the FHLB.

The ALCO establishes and monitors internal liquidity measures to manage liquidity exposure.

Liquidity remained within target ranges established by the ALCO during the six months ended June 30, 2022.

Liquidity remained within target ranges established by the ALCO during the nine months ended September 30, 2022.

Based on its assessment of the liquidity considerations described above, management believes the Corporation’s sources of funding meet anticipated funding needs.

Net cash provided by operating activities amounted to $51.6 million for the six months ended June 30, 2022, reflecting net income of $36.4 million and mortgage banking related adjustments to reconcile net income to net cash provided by operating activities.

Net cash used in investing activities totaled $312.7 million for the six months ended June 30, 2022, reflecting outflows to fund purchases of debt securities, an increase in loans and a purchase of BOLI.

Net cash provided by operating activities amounted to $71.8 million for the nine months ended September 30, 2022, reflecting net income of $55.1 million and mortgage banking related adjustments to reconcile net income to net cash provided by operating activities.

Net cash used in investing activities totaled $723.8 million for the nine months ended September 30, 2022, reflecting an increase in loans, outflows to fund purchases of debt securities and a purchase of BOLI.

These outflows were partially offset by net inflows from maturities, calls and principal payments of debt securities.

For the six months ended June 30, 2022, net cash provided by financing activities amounted to $181.2 million, with a net increase in FHLB advances and growth in deposits, partially offset by the payment of dividends to shareholders and purchases of treasury stock.

For the nine months ended September 30, 2022, net cash provided by financing activities amounted to $606.3 million, with a net increase in FHLB advances and growth in deposits, partially offset by the payment of dividends to shareholders and purchases of treasury stock.

See the Unaudited Consolidated Statements of Cash Flows for further information about sources and uses of cash.

Capital Resources

Total shareholders’ equity amounted to $476.6 million at June 30, 2022, down by $88.2 million from December 31, 2021.

The decline reflected a decrease of $98.1 million in the AOCL component of shareholders' equity, due to a temporary decrease in the fair value of available for sale debt securities and cash flow hedges reflecting relative changes in market interest rates.

In addition, the change in shareholders’ equity also included $18.9 million in dividend declarations and a net increase in treasury stock repurchases of $7.3 million, partially offset by net income of $36.4 million.

The Corporation declared a quarterly dividend of 54 cents per share for the three months ended June 30, 2022, compared to 52 cents per share declared for the same period in 2021.

On a year-to-date basis, dividend declarations totaled $1.08 per share in 2022, compared to $1.04 per share in 2021.

The ratio of total equity to total assets was 7.97% at June 30, 2022, compared to a ratio of 9.65% at December 31, 2021.

Book value per share at June 30, 2022 and December 31, 2021 was $27.73 and $32.59, respectively.

The Bancorp and the Bank are subject to various regulatory capital requirements and are considered “well capitalized” with a total risk-based capital ratio of 13.51% at June 30, 2022, compared to 14.01% at December 31, 2021.

See Note 8 to the Unaudited Consolidated Financial Statements for additional discussion of regulatory capital requirements and the election of the ASC 326 phase-in option provided by regulatory guidance, which phases in the impact of ASC 326 on regulatory capital over a three-year period that commenced January 1, 2022.

Off-Balance Sheet Arrangements

In the normal course of business, the Corporation engages in a variety of financial transactions that, in accordance with GAAP, are not recorded in the financial statements, or are recorded in amounts that differ from the notional amounts.

Such transactions are used to meet the financing needs of its customers and to manage the exposure to fluctuations in interest rates.

These financial transactions include commitments to extend credit, standby letters of credit, forward loan

Management's Discussion and Analysis

commitments, loan related derivative contracts and interest rate risk management contracts.

These financial transactions include commitments to extend credit, standby letters of credit, forward loan commitments, loan related derivative contracts and interest rate risk management contracts.

These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk.

The Corporation’s credit policies with respect to interest rate swap agreements with commercial borrowers, commitments to extend credit, and standby letters of credit are similar to those used for loans.

The Corporation’s credit policies with respect to interest rate contracts with commercial borrowers, commitments to extend credit, and standby letters of credit are similar to those used for loans.

Interest rate risk management contracts with other counterparties are generally subject to bilateral collateralization terms.

For additional information on derivative financial instruments and financial instruments with off-balance sheet risk see Notes 9 and 17 to the Unaudited Consolidated Financial Statements.

Capital Resources

Total shareholders’ equity amounted to $432.3 million at September 30, 2022, down by $132.5 million from December 31, 2021.

The decline reflected a decrease of $151.8 million in the AOCL component of shareholders' equity, due to decreases in the fair value of available for sale debt securities and cash flow hedges primarily attributable to relative changes in market interest rates.

In addition, the decline also reflected $28.3 million in dividend declarations and a net increase in treasury stock repurchases of $8.2 million, partially offset by net income of $55.1 million.

The Corporation declared a quarterly dividend of 54 cents per share for the three months ended September 30, 2022, compared to 52 cents per share declared for the same period in 2021.

On a year-to-date basis, dividend declarations totaled $1.62 per share in 2022, compared to $1.56 per share in 2021.

Management's Discussion and Analysis

The ratio of total equity to total assets was 6.75% at September 30, 2022, compared to a ratio of 9.65% at December 31, 2021.

Book value per share at September 30, 2022 and December 31, 2021 was $25.17 and $32.59, respectively.

The Bancorp and the Bank are subject to various regulatory capital requirements and are considered “well capitalized” with a total risk-based capital ratio of 12.65% at September 30, 2022, compared to 14.01% at December 31, 2021.

Asset/Liability Management and Interest Rate Risk

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The ALCO reviews simulation results to determine whether the Corporation’s exposure to a decline in net interest income remains within established tolerance levels over the simulation horizons and to develop appropriate strategies to manage this exposure.

As of June 30, 2022 and December 31, 2021, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Corporation.

As of September 30, 2022 and December 31, 2021, net interest income simulations indicated that exposure to changing interest rates over the simulation horizons remained within tolerance levels established by the Corporation.

All changes are measured in comparison to the projected net interest income that would result from an “unchanged” rate scenario where both interest rates and the composition of the Corporation’s balance sheet remain stable for a 60-month period.

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Because income simulations assume that the Corporation’s balance sheet will remain static over the simulation horizon, the results do not reflect adjustments in strategy that the ALCO could implement in response to rate shifts.

The following table sets forth the estimated change in net interest income from an unchanged rate scenario over the periods indicated for parallel changes in market interest rates using the Corporation’s on- and off-balance sheet financial instruments as of June 30, 2022 and December 31, 2021.

Interest rates are assumed to shift by a parallel 100, 200 or 300 basis points upward or 100 basis points downward over a 12-month period, except for core savings deposits, which are assumed to shift by lesser amounts due to their relative historical insensitivity to market interest rate movements.

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It should be noted that the rate scenarios shown do not necessarily reflect the ALCO’s view of the “most likely” change in interest rates over the periods indicated.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Months 1 - 12 Months 13 - 24 Months 1 - 12 Months 13 - 24

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Asset yields would likely decline more rapidly than deposit costs as current asset holdings mature or reprice, since cash flow from mortgage-related prepayments and redemption of callable securities would increase as market interest rates fall.

The ALCO estimates that positive exposure of net interest income to rising rates as compared to an unchanged rate scenario results from a more rapid projected relative rate of increase in asset yields than funding costs over the near term.

As of September 30, 2022, the ALCO estimates that positive exposure of net interest income to rising rates in Year 1 as compared to an unchanged rate scenario results from a more rapid projected relative rate of increase in asset yields than funding costs over the near term.

For simulation purposes, deposit rate changes are anticipated to lag behind other market interest rates in both timing and magnitude.

The ALCO’s estimate of interest rate risk exposure to rising rate environments, including those involving changes to the shape of the yield curve, incorporates certain assumptions regarding the shift in deposit balances from low-cost core savings categories to higher-cost deposit categories, which has characterized a shift in funding mix during the past rising interest rate cycles.

The relative change in interest rate sensitivity to rising rates from December 31, 2021 as shown in the above table was largely attributable to a higher level of longer-term fixed rate assets at June 30, 2022.

As of September 30, 2022, the negative exposure of net interest income to rising rates as compared to an unchanged rate scenario is primarily attributable to a projected increase in funding costs.

As market rates increase, ALCO modeling assumes that deposits will shift from low cost to higher cost deposits.

This assumption reflects historical operating conditions in rising rate cycles.

Although asset yields would increase in a rising interest rate environment, the cumulative impact of relative growth in rate-sensitive higher cost deposit categories and wholesale funds suggests that by Year 2 of rising interest rate scenarios, the increase in the Corporation’s cost of funds could result in a relative decline in net interest margin compared to an unchanged rate scenario.

The overall decline in interest rate sensitivity to rising rates from December 31, 2021, as shown in the above table, was largely attributable to a higher level of longer-term fixed rate assets, as well as an increase in the proportion of wholesale funds to total sources of funds at September 30, 2022.

Fixed rate assets would not reprice upward in a rising rate environment.

Wholesale funds would reprice more quickly and by a greater amount than the repricing of core deposits in response to changes in market interest rates.

While the ALCO reviews and updates simulation assumptions and also periodically back-tests the simulation results to ensure that the assumptions are reasonable and current, income simulation may not always prove to be an accurate indicator of interest rate risk or future NIM.

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The relationship between short-term interest rate changes and core deposit rate and balance changes may differ from the ALCO’s estimates used in income simulation.

Management's Discussion and Analysis

It should also be noted that the static balance sheet assumption does not necessarily reflect the Corporation’s expectation for future balance sheet growth, which is a function of the business environment and customer behavior.

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Changes in prepayment speeds could also increase or decrease the amortization of premium or accretion of discounts related to such instruments, thereby affecting interest income.

Management's Discussion and Analysis

The Corporation also monitors the potential change in market value of its available for sale debt securities in changing interest rate environments.

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Results are calculated using industry-standard analytical techniques and securities data.

The following table summarizes the potential change in market value of the Corporation’s available for sale debt securities as of June 30, 2022 and December 31, 2021 resulting from immediate parallel rate shifts:

The following table summarizes the potential change in market value of the Corporation’s available for sale debt securities as of September 30, 2022 and December 31, 2021 resulting from immediate parallel rate shifts:

(Dollars in thousands)

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Trust preferred debt and other corporate debt securities (18) 7

Total change in market value as of June 30, 2022 $69,331 ($134,210)

Total change in market value as of September 30, 2022 $83,900 ($108,551)

Total change in market value as of December 31, 2021 $10,166 ($119,505)

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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