UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			For the quarterly period ended ~~9/30/2022~~June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

			For the transition period from to

Commission File Number: 001-31566

PROVIDENT FINANCIAL SERVICES, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware			42-1547151
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

239 Washington Street	Jersey City	New Jersey	07302
(Address of Principal Executive Offices)	(City)	(State)	(Zip Code)

(732) 590-9200

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Symbol(s)

Name of each exchange on which registered

Common

PFS

New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý NO ¨

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding twelve months (or for such shorter period that the Registrant was required to submit and post such files). Yes ý NO ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☒

Accelerated Filer

☐

Non-Accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ý

As of ~~November~~August 1, ~~2022~~2023 there were 83,209,012 shares issued and ~~75,275,038~~75,614,511 shares outstanding of the Registrant’s Common Stock, par value $0.01 per share, including ~~104,129~~75,341 shares held by the First Savings Bank Directors’ Deferred Fee Plan not otherwise considered outstanding under U.S. generally accepted accounting principles.

PROVIDENT FINANCIAL SERVICES, INC.

INDEX TO FORM 10-Q


Item Number	Item Number		Page Number	Item Number		Page Number

PART I—FINANCIAL INFORMATION	PART I—FINANCIAL INFORMATION			PART I—FINANCIAL INFORMATION

1	1	Financial Statements:		1	Financial Statements:

		Consolidated Statements of Financial Condition as of September 30, 2022 (unaudited) and December 31, 2021	3		Consolidated Statements of Financial Condition as of June 30, 2023 (unaudited) and December 31, 2022	3

		Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021 (unaudited)	4		Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022 (unaudited)	4

		Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021 (unaudited)	5		Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022 (unaudited)	5

		Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (unaudited)	6		Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)	6

		Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)	8		Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)	8

		Notes to Unaudited Consolidated Financial Statements	10		Notes to Unaudited Consolidated Financial Statements	10

2	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43

3	3	Quantitative and Qualitative Disclosures About Market Risk	53	3	Quantitative and Qualitative Disclosures About Market Risk	54

4	4	Controls and Procedures	55	4	Controls and Procedures	56

PART II—OTHER INFORMATION	PART II—OTHER INFORMATION			PART II—OTHER INFORMATION

1	1	Legal Proceedings	56	1	Legal Proceedings	57

1A.	1A.	Risk Factors	56	1A.	Risk Factors	57

2	2	Unregistered Sales of Equity Securities and Use of Proceeds	59	2	Unregistered Sales of Equity Securities and Use of Proceeds	57

3	3	Defaults Upon Senior Securities	59	3	Defaults Upon Senior Securities	57

4	4	Mine Safety Disclosures	59	4	Mine Safety Disclosures	57

5	5	Other Information	59	5	Other Information	57

6	6	Exhibits	59	6	Exhibits	58

Signatures	Signatures		61	Signatures		60

PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Financial Condition

~~September~~June 30, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022

(Dollars in Thousands)


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
ASSETS	ASSETS					ASSETS
Cash and due from banks	Cash and due from banks	$	183,929	$	506,270	Cash and due from banks	$	208,842	$	186,490
Short-term investments	Short-term investments	939		206,193		Short-term investments	30		18
Total cash and cash equivalents	Total cash and cash equivalents	184,868		712,463		Total cash and cash equivalents	208,872		186,508
Available for sale debt securities, at fair value	Available for sale debt securities, at fair value	1,829,309		2,057,851		Available for sale debt securities, at fair value	1,749,889		1,803,548
Held to maturity debt securities, net (fair value of $368,668 at September 30, 2022 (unaudited) and $449,709 at December 31, 2021)		393,069		436,150
Held to maturity debt securities, net (fair value of $365,029 at June 30, 2023 (unaudited) and $373,468 at December 31, 2022)						Held to maturity debt securities, net (fair value of $365,029 at June 30, 2023 (unaudited) and $373,468 at December 31, 2022)	378,894		387,923
Equity securities, at fair value	Equity securities, at fair value	1,059		1,325		Equity securities, at fair value	1,238		1,147
Federal Home Loan Bank stock	Federal Home Loan Bank stock	55,717		34,290		Federal Home Loan Bank stock	93,330		68,554
Loans	Loans	10,046,529		9,581,624		Loans	10,530,531		10,248,883
Less allowance for credit losses	Less allowance for credit losses	88,633		80,740		Less allowance for credit losses	102,073		88,023
Net loans	Net loans	9,957,896		9,500,884		Net loans	10,428,458		10,160,860
Foreclosed assets, net	Foreclosed assets, net	2,053		8,731		Foreclosed assets, net	13,697		2,124
Banking premises and equipment, net	Banking premises and equipment, net	80,770		80,559		Banking premises and equipment, net	70,602		79,794
Accrued interest receivable	Accrued interest receivable	45,120		41,990		Accrued interest receivable	53,845		51,903
Intangible assets	Intangible assets	461,673		464,183		Intangible assets	459,383		460,892
Bank-owned life insurance	Bank-owned life insurance	237,590		236,630		Bank-owned life insurance	241,107		239,040
Other assets	Other assets	354,722		206,146		Other assets	330,288		341,143
Total assets	Total assets	$	13,603,846	$	13,781,202	Total assets	$	14,029,603	$	13,783,436

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:	Deposits:					Deposits:
Demand deposits	Demand deposits	$	8,503,639	$	9,080,956	Demand deposits	$	7,965,529	$	8,373,005
Savings deposits	Savings deposits	1,501,857		1,460,541		Savings deposits	1,275,262		1,438,583
Certificates of deposit of $100,000 or more	Certificates of deposit of $100,000 or more	410,003		368,277		Certificates of deposit of $100,000 or more	666,276		504,627
Other time deposits	Other time deposits	270,106		324,238		Other time deposits	354,053		246,809
Total deposits	Total deposits	10,685,605		11,234,012		Total deposits	10,261,120		10,563,024
Mortgage escrow deposits	Mortgage escrow deposits	39,623		34,440		Mortgage escrow deposits	44,280		35,705
Borrowed funds	Borrowed funds	1,063,602		626,774		Borrowed funds	1,849,714		1,337,370
Subordinated debentures	Subordinated debentures	10,442		10,283		Subordinated debentures	10,596		10,493
Other liabilities	Other liabilities	253,589		178,597		Other liabilities	221,422		239,141
Total liabilities	Total liabilities	12,052,861		12,084,106		Total liabilities	12,387,132		12,185,733
Stockholders’ Equity:	Stockholders’ Equity:					Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued	Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued	—		—		Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued	—		—
Common stock, $0.01 par value, 200,000,000 shares authorized, 83,209,012 shares issued and 75,162,357 shares outstanding at September 30, 2022 and 76,969,999 outstanding at December 31, 2021		832		832
Common stock, $0.01 par value, 200,000,000 shares authorized, 83,209,012 shares issued and 75,530,425 shares outstanding at June 30, 2023 and 75,169,196 outstanding at December 31, 2022						Common stock, $0.01 par value, 200,000,000 shares authorized, 83,209,012 shares issued and 75,530,425 shares outstanding at June 30, 2023 and 75,169,196 outstanding at December 31, 2022	832		832
Additional paid-in capital	Additional paid-in capital	978,363		969,815		Additional paid-in capital	986,150		981,138
Retained earnings	Retained earnings	886,332		814,533		Retained earnings	954,403		918,158
Accumulated other comprehensive (loss) income	Accumulated other comprehensive (loss) income	(174,487)		6,863		Accumulated other comprehensive (loss) income	(162,493)		(165,045)
Treasury stock	Treasury stock	(127,145)		(79,603)		Treasury stock	(127,818)		(127,154)
Unallocated common stock held by the Employee Stock Ownership Plan	Unallocated common stock held by the Employee Stock Ownership Plan	(12,910)		(15,344)		Unallocated common stock held by the Employee Stock Ownership Plan	(8,603)		(10,226)
Common stock acquired by deferred compensation plans	Common stock acquired by deferred compensation plans	(3,537)		(3,984)		Common stock acquired by deferred compensation plans	(3,150)		(3,427)
Deferred compensation plans	Deferred compensation plans	3,537		3,984		Deferred compensation plans	3,150		3,427
Total stockholders’ equity	Total stockholders’ equity	1,550,985		1,697,096		Total stockholders’ equity	1,642,471		1,597,703
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	13,603,846	$	13,781,202	Total liabilities and stockholders’ equity	$	14,029,603	$	13,783,436

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Income

Three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)

(Dollars in Thousands, except per share data)

Three months ended September 30, Nine months ended September 30,
2022 2021 2022 2021
Interest income:
Real estate secured loans $ 80,273 $ 62,470 $ 213,181 $ 187,363
Commercial loans 25,201 24,454 70,385 75,770
Consumer loans 3,785 3,345 10,268 10,249
Available for sale debt securities, equity securities and Federal Home Loan Bank stock 9,560 5,877 25,966 17,211
Held to maturity debt securities 2,416 2,638 7,501 8,122
Deposits, Federal funds sold and other short-term investments 496 810 1,705 1,954
Total interest income 121,731 99,594 329,006 300,669
Interest expense:
Deposits 9,560 6,295 20,322 20,495
Borrowed funds 2,518 1,768 4,790 7,130
Subordinated debt 164 303 403 912
Total interest expense 12,242 8,366 25,515 28,537
Net interest income 109,489 91,228 303,491 272,132
Provision charge (benefit) for credit losses 8,413 969 5,004 (24,736)
Net interest income after provision for credit losses 101,076 90,259 298,487 296,868
Non-interest income:
Fees 7,203 6,963 21,516 22,623
Wealth management income 6,785 7,921 21,274 22,914
Insurance agency income 2,865 2,433 9,135 8,009
Bank-owned life insurance 1,237 1,880 3,978 5,970
Net (losses) gains on securities transactions (3) 27 154 257
Other income (1)
10,358 4,138 13,466 6,383
Total non-interest income 28,445 23,362 69,523 66,156
Non-interest expense:
Compensation and employee benefits 38,079 37,554 112,582 107,737
Net occupancy expense 8,452 7,950 26,262 25,158
Data processing expense 5,599 4,827 16,575 14,629
FDIC insurance 1,400 1,575 3,955 4,915
Amortization of intangibles 779 883 2,511 2,773
Advertising and promotion expense 1,366 783 3,692 2,586
Credit loss (benefit) expense for off-balance sheet credit exposures 1,575 980 (1,788) 2,155
Other operating expenses 12,193 8,888 31,384 28,036
Total non-interest expense 69,443 63,440 195,173 187,989
Income before income tax expense 60,078 50,181 172,837 175,035
Income tax expense 16,657 12,913 46,224 44,417
Net income $ 43,421 $ 37,268 $ 126,613 $ 130,618
Basic earnings per share $ 0.58 $ 0.49 $ 1.69 $ 1.71
Weighted average basic shares outstanding 74,297,237 76,604,653 74,808,358 76,588,549
Diluted earnings per share $ 0.58 $ 0.49 $ 1.69 $ 1.70
Weighted average diluted shares outstanding 74,393,380 76,685,206 74,896,493 76,673,563

~~(1) Included in other income, for the three and nine months ended September 30, 2022, is an $8.6 million gain realized on the sale of a foreclosed commercial office property.~~


	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Interest income:
Real estate secured loans	$	99,302	$	69,073	$	195,290	$	132,908
Commercial loans	31,426		22,363		60,109		45,184
Consumer loans	4,431		3,344		8,673		6,483
Available for sale debt securities, equity securities and Federal Home Loan Bank stock	11,432		8,454		22,862		16,406
Held to maturity debt securities	2,357		2,489		4,725		5,085
Deposits, Federal funds sold and other short-term investments	948		562		1,793		1,209
Total interest income	149,896		106,285		293,452		207,275
Interest expense:
Deposits	36,447		5,576		63,957		10,763
Borrowed funds	14,088		1,104		21,564		2,272
Subordinated debt	255		130		501		239
Total interest expense	50,790		6,810		86,022		13,274
Net interest income	99,106		99,475		207,430		194,001
Provision charge (benefit) for credit losses	10,397		2,996		16,398		(3,409)
Net interest income after provision charge (benefit) for credit losses	88,709		96,479		191,032		197,410
Non-interest income:
Fees	5,775		7,424		12,162		14,313
Wealth management income	6,919		7,024		13,834		14,489
Insurance agency income	3,847		2,850		7,950		6,270
Bank-owned life insurance	1,534		1,563		3,018		2,741
Net gains on securities transactions	29		141		24		157
Other income	1,283		1,930		4,552		3,108
Total non-interest income	19,387		20,932		41,540		41,078
Non-interest expense:
Compensation and employee benefits	35,283		37,437		74,021		74,503
Net occupancy expense	7,949		8,479		16,360		17,810
Data processing expense	5,716		5,632		11,224		10,976
FDIC insurance	2,125		1,350		4,061		2,555
Amortization of intangibles	749		873		1,511		1,732
Advertising and promotion expense	1,379		1,222		2,589		2,326
Provision (benefit) charge for credit losses on off-balance sheet credit exposures	(647)		(973)		92		(3,363)
Merger-related expenses	1,960		—		3,060		—
Other operating expenses	9,949		9,826		21,032		19,191
Total non-interest expense	64,463		63,846		133,950		125,730
Income before income tax expense	43,633		53,565		98,622		112,758
Income tax expense	11,630		14,337		26,083		29,567
Net income	$	32,003	$	39,228	$	72,539	$	83,191
Basic earnings per share	$	0.43	$	0.53	$	0.97	$	1.11
Weighted average basic shares outstanding	74,823,272		74,328,632		74,734,795		75,068,154
Diluted earnings per share	$	0.43	$	0.53	$	0.97	$	1.11
Weighted average diluted shares outstanding	74,830,187		74,400,788		74,766,848		75,152,286

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Comprehensive Income

Three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)

(Dollars in Thousands)


		Three months ended September 30,				Nine months ended September 30,					Three months ended June 30,				Six months ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income	Net income	$	43,421	$	37,268	$	126,613	$	130,618	Net income	$	32,003	$	39,228	$	72,539	$	83,191
Other comprehensive income, net of tax:
Other comprehensive income (loss), net of tax:										Other comprehensive income (loss), net of tax:
Unrealized gains and losses on available for sale debt securities:	Unrealized gains and losses on available for sale debt securities:									Unrealized gains and losses on available for sale debt securities:
Net unrealized losses arising during the period		(67,293)		(7,990)		(197,997)		(14,569)
Net unrealized (losses) gains arising during the period										Net unrealized (losses) gains arising during the period	(14,726)		(45,733)		6,138		(130,704)
Reclassification adjustment for gains included in net income	Reclassification adjustment for gains included in net income	—		—		(42)		(171)		Reclassification adjustment for gains included in net income	—		(42)		—		(42)
Total	Total	(67,293)		(7,990)		(198,039)		(14,740)		Total	(14,726)		(45,775)		6,138		(130,746)
Unrealized gains on derivatives		4,841		1,768		17,437		5,165
Unrealized gains and losses on derivatives:										Unrealized gains and losses on derivatives:
Net unrealized gains arising during the period										Net unrealized gains arising during the period	3,650		2,276		3,033		12,227
Reclassification adjustment for (gains) losses included in net income										Reclassification adjustment for (gains) losses included in net income	(3,010)		(118)		(6,089)		369
Total										Total	640		2,158		(3,056)		12,596
Amortization related to post-retirement obligations	Amortization related to post-retirement obligations	(236)		(103)		(748)		(323)		Amortization related to post-retirement obligations	(261)		(236)		(530)		(512)
Total other comprehensive loss		(62,688)		(6,325)		(181,350)		(9,898)
Total comprehensive (loss) income		$	(19,267)	$	30,943	$	(54,737)	$	120,720
Total other comprehensive (loss) income										Total other comprehensive (loss) income	(14,347)		(43,853)		2,552		(118,662)
Total comprehensive income (loss)										Total comprehensive income (loss)	$	17,656	$	(4,625)	$	75,091	$	(35,471)

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 (Unaudited)

(Dollars in Thousands)


For the three months ended September 30, 2021		COMMON STOCK		ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		TREASURYSTOCK		UNALLOCATED ESOP SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS		DEFERRED COMPENSATION PLANS		TOTAL STOCKHOLDERS’ EQUITY
Balance at June 30, 2021		$	832	$	965,470	$	775,235	$	14,082	$	(59,307)	$	(18,678)	$	(4,213)	$	4,213	$	1,677,634
For the three months ended June 30, 2022																				For the three months ended June 30, 2022	COMMON STOCK		ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME		TREASURYSTOCK		UNALLOCATED ESOP SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS		DEFERRED COMPENSATION PLANS		TOTAL STOCKHOLDERS’ EQUITY
Balance at March 31, 2022																				Balance at March 31, 2022	$	832	$	972,552	$	839,807	$	(67,946)	$	(109,581)	$	(14,533)	$	(3,844)	$	3,844	$	1,621,131
Net income	Net income	—		—		37,268		—		—		—		—		—		37,268		Net income	—		—		39,228		—		—		—		—		—		39,228
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—		—		(6,325)		—		—		—		—		(6,325)		Other comprehensive loss, net of tax	—		—		—		(43,853)		—		—		—		—		(43,853)
Cash dividends paid	Cash dividends paid	—		—		(17,790)		—		—		—		—		—		(17,790)		Cash dividends paid	—		—		(18,058)		—		—		—		—		—		(18,058)

Distributions from deferred comp plans	Distributions from deferred comp plans	—		38		—		—		—		—		89		(89)		38		Distributions from deferred comp plans	—		41		—		—		—		—		139		(139)		41
Purchases of treasury stock	Purchases of treasury stock	—		—		—		—		(13,865)		—		—		—		(13,865)		Purchases of treasury stock	—		—		—		—		(17,505)		—		—		—		(17,505)

Purchase of employee restricted shares to fund statutory tax withholding																				Purchase of employee restricted shares to fund statutory tax withholding	—		—		—		—		(5)		—		—		—		(5)

Allocation of ESOP shares	Allocation of ESOP shares	—		225		—		—		—		769		—		—		994		Allocation of ESOP shares	—		250		—		—		—		812		—		—		1,062
Allocation of Stock Award Plan ("SAP") shares	Allocation of Stock Award Plan ("SAP") shares	—		1,421		—		—		—		—		—		—		1,421		Allocation of Stock Award Plan ("SAP") shares	—		3,174		—		—		—		—		—		—		3,174

Allocation of stock options	Allocation of stock options	—		49		—		—		—		—		—		—		49		Allocation of stock options	—		50		—		—		—		—		—		—		50
Balance at September 30, 2021		$	832	$	967,203	$	794,713	$	7,757	$	(73,172)	$	(17,909)	$	(4,124)	$	4,124	$	1,679,424
Balance at June 30, 2022																				Balance at June 30, 2022	$	832	$	976,067	$	860,977	$	(111,799)	$	(127,091)	$	(13,721)	$	(3,705)	$	3,705	$	1,585,265


For the nine months ended September 30, 2021		COMMONSTOCK		ADDITIONAL PAID-IN CAPITAL		RETAINEDEARNINGS		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		TREASURYSTOCK		UNALLOCATED ESOP SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS		DEFERRED COMPENSATION PLANS		TOTAL STOCKHOLDERS’ EQUITY
Balance at December 31, 2020		$	832	$	962,453	$	718,090	$	17,655	$	(59,018)	$	(20,215)	$	(4,549)	$	4,549	$	1,619,797
For the six months ended June 30, 2022																				For the six months ended June 30, 2022	COMMONSTOCK		ADDITIONAL PAID-IN CAPITAL		RETAINEDEARNINGS		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		TREASURYSTOCK		UNALLOCATED ESOP SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS		DEFERRED COMPENSATION PLANS		TOTAL STOCKHOLDERS’ EQUITY
Balance at December 31, 2021																				Balance at December 31, 2021	$	832	$	969,815	$	814,533	$	6,863	$	(79,603)	$	(15,344)	$	(3,984)	$	3,984	$	1,697,096
Net income	Net income	—		—		130,618		—		—		—		—		—		130,618		Net income	—		—		83,191		—		—		—		—		—		83,191
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—		—		(9,898)		—		—		—		—		(9,898)		Other comprehensive loss, net of tax	—		—		—		(118,662)		—		—		—		—		(118,662)
Cash dividends paid	Cash dividends paid	—		—		(53,995)		—		—		—		—		—		(53,995)		Cash dividends paid	—		—		(36,747)		—		—		—		—		—		(36,747)

Distributions from deferred comp plans	Distributions from deferred comp plans	—		107		—		—		—		—		425		(425)		107		Distributions from deferred comp plans	—		86		—		—		—		—		279		(279)		86
Purchases of treasury stock	Purchases of treasury stock	—		—		—		—		(13,913)		—		—		—		(13,913)		Purchases of treasury stock	—		—		—		—		(46,530)		—		—		—		(46,530)
Purchase of employee restricted shares to fund statutory tax withholding	Purchase of employee restricted shares to fund statutory tax withholding	—		—		—		—		(961)		—		—		—		(961)		Purchase of employee restricted shares to fund statutory tax withholding	—		—		—		—		(958)		—		—		—		(958)

Stock option exercises	Stock option exercises	—		(82)		—		—		720		—		—		—		638		Stock option exercises	—		—		—		—		—		—		—		—		—
Allocation of ESOP shares	Allocation of ESOP shares	—		687		—		—		—		2,306		—		—		2,993		Allocation of ESOP shares	—		582		—		—		—		1,623		—		—		2,205
Allocation of SAP shares	Allocation of SAP shares	—		3,887		—		—		—		—		—		—		3,887		Allocation of SAP shares	—		5,485		—		—		—		—		—		—		5,485

Allocation of stock options	Allocation of stock options	—		151		—		—		—		—		—		—		151		Allocation of stock options	—		99		—		—		—		—		—		—		99
Balance at September 30, 2021		$	832	$	967,203	$	794,713	$	7,757	$	(73,172)	$	(17,909)	$	(4,124)	$	4,124	$	1,679,424
Balance at June 30, 2022																				Balance at June 30, 2022	$	832	$	976,067	$	860,977	$	(111,799)	$	(127,091)	$	(13,721)	$	(3,705)	$	3,705	$	1,585,265

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Changes in Stockholders’ Equity

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 (Unaudited)

(Dollars in Thousands)


For the three months ended September 30, 2022		COMMON STOCK		ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE (LOSS)		TREASURY STOCK		UNALLOCATED ESOP SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS		DEFERRED COMPENSATION PLANS		TOTAL STOCKHOLDERS’ EQUITY
Balance at June 30, 2022		832		976,067		860,977		(111,799)		(127,091)		(13,721)		(3,705)		3,705		1,585,265
For the three months ended June 30, 2023																				For the three months ended June 30, 2023	COMMON STOCK		ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE LOSS		TREASURY STOCK		UNALLOCATED ESOP SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS		DEFERRED COMPENSATION PLANS		TOTAL STOCKHOLDERS’ EQUITY
Balance at March 31, 2023																				Balance at March 31, 2023	832		984,089		940,533		(148,146)		(127,814)		(9,414)		(3,289)		3,289		1,640,080
Net income	Net income	—		—		43,421		—		—		—		—		—		43,421		Net income	—		—		32,003		—		—		—		—		—		32,003
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—		—		—		(62,688)		—		—		—		—		(62,688)		Other comprehensive loss, net of tax	—		—		—		(14,347)		—		—		—		—		(14,347)
Cash dividends paid	Cash dividends paid	—		—		(18,066)		—		—		—		—		—		(18,066)		Cash dividends paid	—		—		(18,133)		—		—		—		—		—		(18,133)

Distributions from deferred comp plans	Distributions from deferred comp plans	—		47		—		—		—		—		168		(168)		47		Distributions from deferred comp plans	—		32		—		—		—		—		139		(139)		32
Purchases of treasury stock	Purchases of treasury stock	—		—		—		—		—		—		—		—		—		Purchases of treasury stock	—		—		—		—		—		—		—		—		—
Purchase of employee restricted shares to fund statutory tax withholding	Purchase of employee restricted shares to fund statutory tax withholding	—		—		—		—		(54)		—		—		—		(54)		Purchase of employee restricted shares to fund statutory tax withholding	—		—		—		—		(4)		—		—		—		(4)

Stock option exercises	Stock option exercises	—		—		—		—		—		—		—		—		—		Stock option exercises	—		—		—		—		—		—		—		—		—
Allocation of ESOP shares	Allocation of ESOP shares	—		296		—		—		—		811		—		—		1,107		Allocation of ESOP shares	—		(1)		—		—		—		811		—		—		810
Allocation of SAP shares	Allocation of SAP shares	—		1,904		—		—		—		—		—		—		1,904		Allocation of SAP shares	—		1,997		—		—		—		—		—		—		1,997

Allocation of stock options	Allocation of stock options	—		49		—		—		—		—		—		—		49		Allocation of stock options	—		33		—		—		—		—		—		—		33
Balance at September 30, 2022		$	832	$	978,363	$	886,332	$	(174,487)	$	(127,145)	$	(12,910)	$	(3,537)	$	3,537	$	1,550,985
Balance at June 30, 2023																				Balance at June 30, 2023	$	832	$	986,150	$	954,403	$	(162,493)	$	(127,818)	$	(8,603)	$	(3,150)	$	3,150	$	1,642,471


For the nine months ended September 30, 2022		COMMONSTOCK		ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)		TREASURY STOCK		UNALLOCATED ESOP SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS		DEFERRED COMPENSATION PLANS		TOTAL STOCKHOLDERS’ EQUITY
Balance at December 31, 2021		$	832	$	969,815	$	814,533	$	6,863	$	(79,603)	$	(15,344)	$	(3,984)	$	3,984	$	1,697,096
For the six months ended June 30, 2023																				For the six months ended June 30, 2023	COMMONSTOCK		ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS		ACCUMULATED OTHER COMPREHENSIVE LOSS		TREASURY STOCK		UNALLOCATED ESOP SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS		DEFERRED COMPENSATION PLANS		TOTAL STOCKHOLDERS’ EQUITY
Balance at December 31, 2022																				Balance at December 31, 2022	$	832	$	981,138	$	918,158	$	(165,045)	$	(127,154)	$	(10,226)	$	(3,427)	$	3,427	$	1,597,703
Net income	Net income	—		—		126,613		—		—		—		—		—		126,613		Net income	—		—		72,539		—		—		—		—		—		72,539
Other comprehensive loss, net of tax		—		—		—		(181,350)		—		—		—		—		(181,350)
Other comprehensive income, net of tax																				Other comprehensive income, net of tax	—		—		—		2,552		—		—		—		—		2,552
Cash dividends paid	Cash dividends paid	—		—		(54,814)		—		—		—		—		—		(54,814)		Cash dividends paid	—		—		(36,727)		—		—		—		—		—		(36,727)

Cumulative effect of adopting Accounting Standards Update ("ASU") No. 2022-02, net of tax																				Cumulative effect of adopting Accounting Standards Update ("ASU") No. 2022-02, net of tax	—		—		433		—		—		—		—		—		433

Distributions from deferred comp plans	Distributions from deferred comp plans	—		133		—		—		—		—		447		(447)		133		Distributions from deferred comp plans	—		79		—		—		—		—		277		(277)		79
Purchases of treasury stock		—		—		—		—		(46,529)		—		—		—		(46,529)

Purchase of employee restricted shares to fund statutory tax withholding	Purchase of employee restricted shares to fund statutory tax withholding	—		—		—		—		(1,013)		—		—		—		(1,013)		Purchase of employee restricted shares to fund statutory tax withholding	—		—		—		—		(1,671)		—		—		—		(1,671)

Stock option exercises	Stock option exercises	—		—		—		—		—		—		—		—		—		Stock option exercises	—		(217)		—		—		1,007		—		—		—		790
Allocation of ESOP shares	Allocation of ESOP shares	—		878		—		—		—		2,434		—		—		3,312		Allocation of ESOP shares	—		243		—		—		—		1,623		—		—		1,866
Allocation of SAP shares	Allocation of SAP shares	—		7,389		—		—		—		—		—		—		7,389		Allocation of SAP shares	—		4,830		—		—		—		—		—		—		4,830

Allocation of stock options	Allocation of stock options	—		148		—		—		—		—		—		—		148		Allocation of stock options	—		77		—		—		—		—		—		—		77
Balance at September 30, 2022		$	832	$	978,363	$	886,332	$	(174,487)	$	(127,145)	$	(12,910)	$	(3,537)	$	3,537	$	1,550,985
Balance at June 30, 2023																				Balance at June 30, 2023	$	832	$	986,150	$	954,403	$	(162,493)	$	(127,818)	$	(8,603)	$	(3,150)	$	3,150	$	1,642,471

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

~~Nine~~Six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (Unaudited)

(Dollars in Thousands)


		Nine months ended September 30,					Six months ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	126,613	$	130,618	Net income	$	72,539	$	83,191
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles	Depreciation and amortization of intangibles	9,845		9,531		Depreciation and amortization of intangibles	5,953		6,579
Provision charge (benefit) for credit losses on loans and securities	Provision charge (benefit) for credit losses on loans and securities	5,004		(24,736)		Provision charge (benefit) for credit losses on loans and securities	16,398		(3,409)
Credit loss (benefit) charge for off-balance sheet credit exposure		(1,788)		2,155
Provision charge (benefit) for credit losses on off-balance sheet credit exposures						Provision charge (benefit) for credit losses on off-balance sheet credit exposures	92		(3,363)
Deferred tax (benefit) expense	Deferred tax (benefit) expense	(222)		5,323		Deferred tax (benefit) expense	(2,332)		3,393
Amortization of operating lease right-of-use assets	Amortization of operating lease right-of-use assets	8,006		7,559		Amortization of operating lease right-of-use assets	5,257		5,393

Income on Bank-owned life insurance	Income on Bank-owned life insurance	(3,978)		(5,970)		Income on Bank-owned life insurance	(3,018)		(2,741)
Net amortization of premiums and discounts on securities	Net amortization of premiums and discounts on securities	10,465		11,032		Net amortization of premiums and discounts on securities	4,012		7,665
Accretion of net deferred loan fees	Accretion of net deferred loan fees	(7,095)		(5,019)		Accretion of net deferred loan fees	(4,691)		(4,801)
Amortization of premiums on purchased loans, net	Amortization of premiums on purchased loans, net	234		536		Amortization of premiums on purchased loans, net	120		154
Originations of loans held for sale	Originations of loans held for sale	(18,467)		(25,016)		Originations of loans held for sale	(11,490)		(16,197)
Proceeds from sales of loans originated for sale	Proceeds from sales of loans originated for sale	16,978		26,056		Proceeds from sales of loans originated for sale	11,938		9,881
ESOP expense	ESOP expense	3,312		2,993		ESOP expense	1,866		2,205
Allocation of stock award expense	Allocation of stock award expense	7,389		3,887		Allocation of stock award expense	4,830		5,485
Allocation of stock option expense	Allocation of stock option expense	148		151		Allocation of stock option expense	77		99

Net gain on sale of loans	Net gain on sale of loans	(1,306)		(1,040)		Net gain on sale of loans	(972)		(824)
Net gain on securities transactions	Net gain on securities transactions	(154)		(257)		Net gain on securities transactions	(24)		(157)
Net gain on sale of premises and equipment	Net gain on sale of premises and equipment	(22)		(35)		Net gain on sale of premises and equipment	(197)		(22)
Net gain on sale of foreclosed assets	Net gain on sale of foreclosed assets	(8,590)		(528)		Net gain on sale of foreclosed assets	(2,789)		(16)
(Increase) decrease in accrued interest receivable		(3,130)		5,584
(Increase) decrease in other assets		(60,364)		10,596
Increase (decrease) in other liabilities		74,992		(31,000)
Increase in accrued interest receivable						Increase in accrued interest receivable	(1,942)		(868)
Decrease (increase) in other assets						Decrease (increase) in other assets	7,490		(12,691)
(Decrease) increase in other liabilities						(Decrease) increase in other liabilities	(17,719)		22,578
Net cash provided by operating activities	Net cash provided by operating activities	157,870		122,420		Net cash provided by operating activities	85,398		101,534
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Proceeds from sales and paydowns of foreclosed assets		16,188		1,368
Net increase in loans						Net increase in loans	(285,500)		(396,236)
Purchases of loans						Purchases of loans	(3,394)		(3,422)
Proceeds from sales of foreclosed assets						Proceeds from sales of foreclosed assets	3,485		280
Proceeds from maturities, calls and paydowns of held to maturity debt securities	Proceeds from maturities, calls and paydowns of held to maturity debt securities	62,597		44,054		Proceeds from maturities, calls and paydowns of held to maturity debt securities	17,545		37,009
Purchases of held to maturity debt securities		(20,665)		(21,417)
Proceeds from sales of available for sale debt securities		—		9,442
Purchases of investment securities held to maturity						Purchases of investment securities held to maturity	(9,130)		(12,369)

Proceeds from maturities, calls and paydowns of available for sale debt securities	Proceeds from maturities, calls and paydowns of available for sale debt securities	227,975		288,699		Proceeds from maturities, calls and paydowns of available for sale debt securities	92,681		166,855
Purchases of available for sale debt securities	Purchases of available for sale debt securities	(279,395)		(1,140,182)		Purchases of available for sale debt securities	(34,802)		(241,725)
Proceeds from redemption of Federal Home Loan Bank stock	Proceeds from redemption of Federal Home Loan Bank stock	89,244		29,197		Proceeds from redemption of Federal Home Loan Bank stock	112,279		31,134
Purchases of Federal Home Loan Bank stock	Purchases of Federal Home Loan Bank stock	(110,671)		(3,752)		Purchases of Federal Home Loan Bank stock	(137,055)		(51,680)

BOLI claim benefits received	BOLI claim benefits received	—		3,851		BOLI claim benefits received	2,347		—
Purchases of loans		(4,326)		(2,060)
Net (increase) decrease in loans		(449,803)		274,399

Proceeds from sales of premises and equipment	Proceeds from sales of premises and equipment	22		35		Proceeds from sales of premises and equipment	62		22
Purchases of premises and equipment	Purchases of premises and equipment	(7,879)		(8,348)		Purchases of premises and equipment	(2,959)		(5,944)
Net cash used in investing activities	Net cash used in investing activities	(476,713)		(524,714)		Net cash used in investing activities	(244,441)		(476,076)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Net (decrease) increase in deposits		(548,407)		998,792
Net decrease in deposits						Net decrease in deposits	(301,904)		(359,788)
Increase in mortgage escrow deposits	Increase in mortgage escrow deposits	5,183		3,266		Increase in mortgage escrow deposits	8,575		7,906
Cash dividends paid to stockholders						Cash dividends paid to stockholders	(36,727)		(36,747)


		Nine months ended September 30,					Six months ended June 30,
		2022		2021
Cash dividends paid to stockholders		(54,814)		(53,995)
							2023		2022
Purchase of treasury stock	Purchase of treasury stock	(46,529)		(13,913)		Purchase of treasury stock	—		(46,530)
Purchase of employee restricted shares to fund statutory tax withholding	Purchase of employee restricted shares to fund statutory tax withholding	(1,013)		(961)		Purchase of employee restricted shares to fund statutory tax withholding	(1,671)		(958)
Stock options exercised	Stock options exercised	—		638		Stock options exercised	790		—
Proceeds from long-term borrowings	Proceeds from long-term borrowings	2,274,000		727,985		Proceeds from long-term borrowings	446,531		964,000
Payments on long-term borrowings	Payments on long-term borrowings	(1,826,556)		(1,275,440)		Payments on long-term borrowings	(32,500)		(579,111)
Net decrease in short-term borrowings		(10,616)		(11,142)
Net cash (used in) provided by financing activities		(208,752)		375,230
Net decrease in cash and cash equivalents		(527,595)		(27,064)
Net increase (decrease) in short-term borrowings						Net increase (decrease) in short-term borrowings	98,313		(9,161)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	181,407		(60,389)
Net increase (decrease) in cash and cash equivalents						Net increase (decrease) in cash and cash equivalents	22,364		(434,931)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	685,163		418,083		Cash and cash equivalents at beginning of period	186,438		685,163
Restricted cash at beginning of period	Restricted cash at beginning of period	27,300		114,270		Restricted cash at beginning of period	70		27,300
Total cash, cash equivalents and restricted cash at beginning of period	Total cash, cash equivalents and restricted cash at beginning of period	712,463		532,353		Total cash, cash equivalents and restricted cash at beginning of period	186,508		712,463
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	183,068		457,744		Cash and cash equivalents at end of period	208,802		277,462
Restricted cash at end of period	Restricted cash at end of period	1,800		47,545		Restricted cash at end of period	70		70
Total cash, cash equivalents and restricted cash at end of period	Total cash, cash equivalents and restricted cash at end of period	$	184,868	$	505,289	Total cash, cash equivalents and restricted cash at end of period	$	208,872	$	277,532

Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest on deposits and borrowings	Interest on deposits and borrowings	$	26,130	$	28,266	Interest on deposits and borrowings	$	81,490	$	14,308
Income taxes	Income taxes	$	25,650	$	41,165	Income taxes	$	26,591	$	7,760
Non-cash investing activities:	Non-cash investing activities:					Non-cash investing activities:

Transfer of loans receivable to foreclosed assets	Transfer of loans receivable to foreclosed assets	$	1,120	$	434	Transfer of loans receivable to foreclosed assets	$	12,341	$	624
Acquisitions:
Non-cash assets acquired at fair value:

Goodwill and other intangible assets		$	—	$	1,422

Other assets		—		(1,422)
Total non-cash assets acquired at fair value		$	—	$	—

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Summary of Significant Accounting Policies

A. Basis of Financial Statement Presentation

The accompanying unaudited consolidated financial statements include the accounts of Provident Financial Services, Inc. (the "Company") and its wholly owned subsidiary, Provident Bank (the ~~“Bank,” together with Provident Financial Services, Inc., the “Company”~~“Bank"). and its wholly owned subsidiaries.

In preparing the interim unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and the consolidated statements of income for the periods presented. Actual results could differ from these estimates. The allowance for credit losses ~~and the valuation of deferred tax assets are~~is a material ~~estimates~~estimate that ~~are~~is particularly susceptible to near-term change.

The interim unaudited consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of the results of operations that may be expected for all of ~~2022.~~2023.

Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. ~~Additionally, certain comparative balances on the interim unaudited consolidated financial statements have been reclassified to conform to the current year’s presentation.~~

These unaudited consolidated financial statements should be read in conjunction with the December 31, ~~2021~~2022 Annual Report to Stockholders on Form 10-K.

B. Earnings Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (dollars in thousands, except per share amounts):


		Three months ended September 30,											Three months ended June 30,
		2022					2021						2023					2022
		Net Income		Weighted Average Common Shares Outstanding	Per Share Amount		Net Income		Weighted Average Common Shares Outstanding	Per Share Amount			Net Income		Weighted Average Common Shares Outstanding	Per Share Amount		Net Income		Weighted Average Common Shares Outstanding	Per Share Amount
Net income	Net income	$	43,421				$	37,268				Net income	$	32,003				$	39,228
Basic earnings per share:	Basic earnings per share:											Basic earnings per share:
Income available to common stockholders	Income available to common stockholders	$	43,421	74,297,237	$	0.58	$	37,268	76,604,653	$	0.49	Income available to common stockholders	$	32,003	74,823,272	$	0.43	$	39,228	74,328,632	$	0.53
Dilutive shares	Dilutive shares			96,143					80,553			Dilutive shares			6,915					72,156
Diluted earnings per share:	Diluted earnings per share:											Diluted earnings per share:
Income available to common stockholders	Income available to common stockholders	$	43,421	74,393,380	$	0.58	$	37,268	76,685,206	$	0.49	Income available to common stockholders	$	32,003	74,830,187	$	0.43	$	39,228	74,400,788	$	0.53


		Nine months ended September 30,											Six months ended June 30,
		2022					2021						2023					2022
		Net Income		Weighted Average Common Shares Outstanding	Per Share Amount		Net Income		Weighted Average Common Shares Outstanding	Per Share Amount			Net Income		Weighted Average Common Shares Outstanding	Per Share Amount		Net Income		Weighted Average Common Shares Outstanding	Per Share Amount
Net income	Net income	$	126,613				$	130,618				Net income	$	72,539				$	83,191
Basic earnings per share:	Basic earnings per share:											Basic earnings per share:
Income available to common stockholders	Income available to common stockholders	$	126,613	74,808,358	$	1.69	$	130,618	76,588,549	$	1.71	Income available to common stockholders	$	72,539	74,734,795	$	0.97	$	83,191	75,068,154	$	1.11
Dilutive shares	Dilutive shares			88,135					85,014			Dilutive shares			32,053					84,132
Diluted earnings per share:	Diluted earnings per share:											Diluted earnings per share:
Income available to common stockholders	Income available to common stockholders	$	126,613	74,896,493	$	1.69	$	130,618	76,673,563	$	1.70	Income available to common stockholders	$	72,539	74,766,848	$	0.97	$	83,191	75,152,286	$	1.11

Anti-dilutive stock options and awards at ~~September~~June 30, 2023 and 2022, ~~and 2021,~~ totaling ~~921,834~~1.3 million shares and ~~830,628~~1.0 million shares, respectively, were excluded from the earnings per share calculations.

C. Loans Receivable and Allowance for Credit Losses

The impact of utilizing the current expected credit loss ("CECL") methodology approach to calculate the allowance for credit losses on loans is significantly influenced by the composition, characteristics and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecast utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility to the Company’s reported earnings. ~~The increase~~For the three and six months ended June 30, 2023, a worsened economic forecast and related deterioration in the ~~provision expense for~~projected commercial property price indices over the ~~three months ended September 30, 2022 was largely a function~~expected life of the weakening economic forecast, combined with an increase in total loans outstanding. The decrease in the period-over-period provision benefit for the nine months ended September 30, 2022 was largely a function of growth in the loan portfolio within our CECL model led to increases to the ~~relative change in the economic outlook~~provisions for credit losses and ~~the significant favorable impact of the post-pandemic recovery in the prior year period.~~off-balance sheet credit exposures. See ~~Note~~Notes 4 and 9 to the Consolidated Financial Statements for more information on the allowance for credit losses on ~~loans.~~loans and off-balance sheet credit exposures.

D. Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets acquired through ~~business combinations.~~purchase acquisitions. In accordance with GAAP, goodwill with an indefinite useful life is not amortized, but is evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances indicate potential impairment between annual measurement dates. Goodwill is analyzed for impairment once a year. As permitted by GAAP, the Company prepares a qualitative assessment in determining whether goodwill may be impaired. The factors considered in the assessment include macroeconomic conditions, industry and market conditions and overall financial performance of the Company, among others. The Company completed its most recent annual goodwill impairment test as of July 1, ~~2022,~~2023. At June 30, 2023, the Company performed an interim goodwill impairment analysis and ~~it is~~concluded that no triggering considerations were met and therefore a test for impairment between annual tests was not ~~more likely than not that the fair value of Provident Financial Services, Inc., the reporting unit, is below its carrying amount.~~required.

Note 2. Business Combinations

Lakeland Bancorp, Inc. - Merger Agreement

On September 26, 2022, the Company entered into a definitive merger agreement pursuant to which it will merge (the “merger”) with Lakeland Bancorp, Inc. ("Lakeland"), and Lakeland Bank, a wholly owned subsidiary of Lakeland, will merge with and into Provident Bank, a wholly owned subsidiary of the Company. The merger agreement has been unanimously approved by the boards of ~~directors of~~both companies and shareholder approval has also been received for both companies. The actual value of the Company’s common stock to be recorded as consideration in the merger will be based on the closing price of Company’s common stock at the time of the merger completion date. Under the merger agreement, each share of Lakeland common stock will be exchanged for 0.8319 shares of the Company's common stock plus cash in lieu of fractional shares. The merger is expected to close in the second quarter of 2023, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by the shareholders of both companies.

Note 3. Investment Securities

At ~~September~~June 30, ~~2022,~~2023, the Company had ~~$1.83~~$1.75 billion and ~~$393.1~~$378.9 million in available for sale debt securities and held to maturity debt securities, respectively. Many factors, including lack of liquidity in the secondary market for certain securities, variations in pricing information, changes in interest rates, regulatory actions, changes in the business environment or any changes in the

competitive marketplace could have an adverse effect on the Company’s investment portfolio. The total number of available for sale and held to maturity debt securities in an unrealized loss position at ~~September~~June 30, ~~2022~~2023 totaled ~~1,053,~~937, compared with ~~166~~914 at December 31, ~~2021.~~2022. The increase in the number of securities in an unrealized loss position at ~~September~~June 30, ~~2022~~2023 was due to higher current market interest rates compared to rates at December 31, ~~2021.~~2022.

Available for Sale Debt Securities

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the fair value for available for sale debt securities at June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value

U.S. Treasury obligations	$	276,106	—	(29,039)	247,067
Agency obligations	31,452		301	—	31,753
Mortgage-backed securities	1,549,842		84	(203,202)	1,346,724
Asset-backed securities	34,351		379	(224)	34,506
State and municipal obligations	64,939		—	(9,214)	55,725
Corporate obligations	40,495		—	(6,381)	34,114

	$	1,997,185	764	(248,060)	1,749,889


	December 31, 2022
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value

U.S. Treasury obligations	$	275,620	—	(29,804)	245,816

Mortgage-backed securities	1,636,913		209	(209,983)	1,427,139
Asset-backed securities	37,706		278	(363)	37,621
State and municipal obligations	67,706		—	(10,842)	56,864
Corporate obligations	40,540		50	(4,482)	36,108

	$	2,058,485	537	(255,474)	1,803,548

The amortized cost and fair value of available for sale debt securities at June 30, 2023, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.


	June 30, 2023
	Amortized cost		Fair value
Due in one year or less	$	—	—
Due after one year through five years	242,910		218,600
Due after five years through ten years	82,226		70,318
Due after ten years	56,404		47,988
	$	381,540	336,906

Investments which pay principal on a periodic basis totaling $1.62 billion at amortized cost and $1.41 billion at fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

There were no sales of securities from the available for sale debt securities portfolio for the three and six months ended June 30, 2023 and 2022. For the three and six months ended June 30, 2023, there were no proceeds from calls on securities in the available for sale debt securities portfolio. For the three and six months ended June 30, 2022, proceeds from calls on securities in the available for sale debt securities portfolio totaled $5.4 million with gains of $58,000 and no losses recognized.

The number of available for sale debt securities in an unrealized loss position at June 30, 2023 totaled 464, compared with 475 at December 31, 2022. The decline in the number of securities in an unrealized loss position at June 30, 2023 was due to maturities and calls of securities in the quarter. All securities in an unrealized loss position were investment grade at June 30, 2023.

Held to Maturity Debt Securities

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the estimated fair value for held to maturity debt securities at June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value
Agency obligations	$	12,096	—	(929)	11,167

State and municipal obligations	357,003		168	(12,510)	344,661
Corporate obligations	9,820		—	(619)	9,201
	$	378,919	168	(14,058)	365,029


	December 31, 2022
	Amortized cost		Gross unrealized gains	Gross unrealized losses	Fair value
Agency obligations	$	9,997	—	(1,033)	8,964

State and municipal obligations	366,164		268	(13,015)	353,417
Corporate obligations	11,789		1	(703)	11,087
	$	387,950	269	(14,751)	373,468

The Company generally purchases securities for long-term investment purposes, and differences between amortized cost and fair value may fluctuate during the investment period. There were no sales of securities from the held to maturity debt securities portfolio for the three and six months ended June 30, 2023 and 2022. For the three and six months ended June 30, 2023, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $3.5 million and $6.6 million, respectively. As to these calls on securities, for the three months ended June 30, 2023, there were gross gains of $28,000 and no gross losses, while for the six months ended June 30, 2023, gross gains totaled $24,000, with no gross losses. For the three and six months ended June 30, 2022, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $10.3 million and $26.2 million, respectively. As to these calls on securities for the three and six months ended June 30, 2022, gross gains totaled $83,000 and $99,000, respectively, with no gross losses.

The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio at June 30, 2023 by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.


	June 30, 2023
	Amortized cost		Fair value
Due in one year or less	$	25,283	25,199
Due after one year through five years	169,684		166,605
Due after five years through ten years	153,491		148,121
Due after ten years	30,461		25,104
	$	378,919	365,029

The allowance for credit losses on held to maturity debt securities at June 30, 2023 and December 31, 2022 was $25,000 and $27,000, respectively, and are excluded from amortized cost in the tables above.

The number of held to maturity debt securities in an unrealized loss position at June 30, 2023 totaled 473, compared with 439 at December 31, 2022. The increase in the number of securities in an unrealized loss position at June 30, 2023, was due to higher current market interest rates compared to rates at December 31, 2022.

Management measures expected credit losses on held to maturity debt securities on a collective basis by security type. Management classifies the held to maturity debt securities portfolio into the following security types:

•Agency obligations;

•Mortgage-backed securities;

•State and municipal obligations; and

•Corporate obligations.

All of the agency obligations held by the Company are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The majority of the state and municipal and corporate obligations carry ~~no lower than A~~credit ratings from the rating agencies at ~~September~~June 30, ~~2022~~2023 no lower than A and the Company had ~~one security~~no securities rated BBB or worse by Moody’s Investors Service.

The Company adopted CECL using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2020. As a result, the amortized cost basis remains the same before and after the effective date of CECL.

~~Available for Sale Debt Securities~~

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the fair value for available for sale debt securities at September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022
Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value
U.S. Treasury obligations $ 275,372 — (31,983) 243,389
Mortgage-backed securities 1,675,759 25 (222,476) 1,453,308
Asset-backed securities 39,495 508 (259) 39,744
State and municipal obligations 67,955 — (12,561) 55,394
Corporate obligations 41,562 59 (4,147) 37,474
$ 2,100,143 592 (271,426) 1,829,309

December 31, 2021
Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value
U.S. Treasury obligations $ 196,897 298 (866) 196,329
Mortgage-backed securities 1,711,312 14,082 (16,563) 1,708,831
Asset-backed securities 45,115 1,687 (5) 46,797
State and municipal obligations 68,702 1,127 (122) 69,707
Corporate obligations 36,109 425 (347) 36,187
$ 2,058,135 17,619 (17,903) 2,057,851

The amortized cost and fair value of available for sale debt securities at September 30, 2022, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.

September 30, 2022
Amortized
cost Fair
value
Due in one year or less $ 1,000 999
Due after one year through five years 175,445 157,244
Due after five years through ten years 144,884 126,701
Due after ten years 63,560 51,313
$ 384,889 336,257

Investments which pay principal on a periodic basis totaling $1.72 billion at amortized cost and $1.49 billion at fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

There were no sales of securities from the available for sale debt securities portfolio for the three months ended September 30, 2022 and 2021. For the nine months ended September 30, 2022, proceeds from calls on securities in the available for sale debt securities portfolio totaled $5.4 million with gains of $58,000 and no losses recognized. For the nine months ended September 30, 2021, proceeds from sales of securities in the available for sale debt securities portfolio totaled $9.4 million, with gains of $230,000 and no losses recognized.

The number of available for sale debt securities in an unrealized loss position at September 30, 2022 totaled 468, compared with 113 at December 31, 2021. The increase in the number of securities in an unrealized loss position at September 30, 2022 was due to higher current market interest rates compared to rates at December 31, 2021. At September 30, 2022, there were two unrated private label mortgage-backed securities in an unrealized loss position, with an amortized cost of $1.1 million and an unrealized loss of $38,000. Additionally, there were four private-label mortgage-backed securities in an unrealized loss position, with an amortized cost of $36.3 million and an unrealized loss of $2.4 million. At September 30, 2022, these private-label securities were all rated AAA.

~~Held to Maturity Debt Securities~~

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the estimated fair value for held to maturity debt securities at September 30, 2022 and December 31, 2021 (in thousands):
September 30, 2022
Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value
Agency obligations $ 9,997 — (1,092) 8,905
Mortgage-backed securities 2 — — 2
State and municipal obligations 372,293 101 (22,662) 349,732
Corporate obligations 10,820 — (791) 10,029
$ 393,112 101 (24,545) 368,668

~~At September 30, 2022, the allowance for credit losses on held to maturity debt securities totaled $43,000.~~

December 31, 2021
Amortized
cost Gross
unrealized
gains Gross
unrealized
losses Fair
value
Agency obligations $ 9,996 — (175) 9,821
Mortgage-backed securities 21 — — 21
State and municipal obligations 415,724 14,463 (635) 429,552
Corporate obligations 10,448 19 (152) 10,315
$ 436,189 14,482 (962) 449,709

~~At December 31, 2021, the allowance for credit losses on held to maturity debt securities totaled $39,000, and is excluded from amortized cost in the table above.~~

The Company generally purchases securities for long-term investment purposes, and differences between amortized cost and fair value may fluctuate during the investment period. There were no sales of securities from the held to maturity debt securities portfolio for the three and nine months ended September 30, 2022 and 2021. For the three and nine months ended September 30, 2022, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $10.3 million and $36.4 million, respectively. As to these calls on securities, for the three months ended September 30, 2022, there were no gross gains and gross losses totaled $3,000, while for the nine months ended September 30, 2022, gross gains totaled $96,000, with no gross losses. For the three and nine months ended September 30, 2021, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $21.1 million and $34.0 million, respectively. As to these calls on securities, for the three and nine months ended September 30, 2021, there were gross gains of $26,505 and no gross losses.

The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio at September 30, 2022 by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.

September 30, 2022
Amortized
cost Fair
value
Due in one year or less $ 16,160 16,105
Due after one year through five years 150,084 145,429
Due after five years through ten years 184,073 172,779
Due after ten years 42,793 34,353
$ 393,110 368,666

Mortgage-backed securities totaling $2,000 for both amortized cost and fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments. Additionally, the allowance for credit losses totaling $43,000 is excluded from the table above.

The number of held to maturity debt securities in an unrealized loss position at September 30, 2022 totaled 585, compared with 53 at December 31, 2021. The increase in the number of securities in an unrealized loss position at September 30, 2022, was due to higher current market interest rates compared to rates at December 31, 2021.

Credit Quality Indicators. The following table provides the amortized cost of held to maturity debt securities by credit rating at ~~September~~June 30, ~~2022~~2023 and December 31, 2021 (in thousands):


		September 30, 2022								June 30, 2023
Total Portfolio	Total Portfolio	AAA		AA	A	BBB	Not Rated	Total	Total Portfolio	AAA		AA	A	BBB	Not Rated	Total
Agency obligations	Agency obligations	$	9,997	—	—	—	—	9,997	Agency obligations	$	12,096	—	—	—	—	12,096
Mortgage-backed securities		2		—	—	—	—	2

State and municipal obligations	State and municipal obligations	49,176		179,741	141,315	770	1,291	372,293	State and municipal obligations	47,125		166,596	142,830	—	452	357,003
Corporate obligations	Corporate obligations	532		3,110	7,178	—	—	10,820	Corporate obligations	505		2,073	6,146	—	1,096	9,820
		$	59,707	182,851	148,493	770	1,291	393,112		$	59,726	168,669	148,976	—	1,548	378,919

		December 31, 2021								December 31, 2022
Total Portfolio	Total Portfolio	AAA		AA	A	BBB	Not Rated	Total	Total Portfolio	AAA		AA	A	BBB	Not Rated	Total
Agency obligations	Agency obligations	$	9,996	—	—	—	—	9,996	Agency obligations	$	9,997	—	—	—	—	9,997
Mortgage-backed securities		21		—	—	—	—	21

State and municipal obligations	State and municipal obligations	54,583		314,396	44,392	945	1,408	415,724	State and municipal obligations	48,453		171,934	143,829	770	1,178	366,164
Corporate obligations	Corporate obligations	510		2,634	7,279	—	25	10,448	Corporate obligations	507		3,592	7,415	—	275	11,789
		$	65,110	317,030	51,671	945	1,433	436,189		$	58,957	175,526	151,244	770	1,453	387,950

Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. At ~~September~~June 30, ~~2022,~~2023, the held to maturity debt securities portfolio was comprised of ~~15%~~16% rated AAA, ~~47%~~45% rated AA, ~~38%~~39% rated A, and less than 1% either below an A rating or not rated by Moody’s Investors Service or Standard and Poor’s. Securities not explicitly rated, such as U.S. Government mortgage-backed securities, were grouped where possible under the credit rating of the issuer of the security.

~~The allowance for credit losses on held to maturity debt securities at September 30, 2022 and December 31, 2021 were $43,000 and $39,000, respectively.~~

Note 4. Loans Receivable and Allowance for Credit Losses

Loans receivable at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are summarized as follows (in thousands):


		September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Mortgage loans:	Mortgage loans:				Mortgage loans:
Residential		$	1,169,368	1,202,638
Commercial	Commercial	4,237,534		3,827,370	Commercial	$	4,373,436	4,316,185
Multi-family	Multi-family	1,478,402		1,364,397	Multi-family	1,645,770		1,513,818
Construction	Construction	666,740		683,166	Construction	707,234		715,494
Residential					Residential	1,166,159		1,177,698
Total mortgage loans	Total mortgage loans	7,552,044		7,077,571	Total mortgage loans	7,892,599		7,723,195

Commercial loans	Commercial loans	2,190,584		2,188,866	Commercial loans	2,348,447		2,233,670
Consumer loans	Consumer loans	316,547		327,442	Consumer loans	301,306		304,780

Total gross loans	Total gross loans	10,059,175		9,593,879	Total gross loans	10,542,352		10,261,645
Premiums on purchased loans	Premiums on purchased loans	1,376		1,451	Premiums on purchased loans	1,374		1,380

Net deferred fees	Net deferred fees	(14,022)		(13,706)	Net deferred fees	(13,195)		(14,142)
Total loans	Total loans	$	10,046,529	9,581,624	Total loans	$	10,530,531	10,248,883

The following tables summarize the aging of loans receivable by portfolio segment and class of loans (in thousands):

September 30, 2022
30-59 Days 60-89 Days Non-accrual Recorded
Investment
> 90 days
accruing Total Past
Due Current Total Loans
Receivable Non-accrual loans with no related allowance
Mortgage loans:
Residential $ 2,922 302 3,120 — 6,344 1,163,024 1,169,368 3,120
Commercial 848 — 35,352 — 36,200 4,201,334 4,237,534 17,055
Multi-family 798 — 1,583 — 2,381 1,476,021 1,478,402 1,583
Construction 1,058 — 1,878 — 2,936 663,804 666,740 1,878
Total mortgage loans 5,626 302 41,933 — 47,861 7,504,183 7,552,044 23,636
Commercial loans 2,101 1,135 17,181 — 20,417 2,170,167 2,190,584 13,000
Consumer loans 401 379 387 — 1,167 315,380 316,547 387
Total gross loans $ 8,128 1,816 59,501 — 69,445 9,989,730 10,059,175 37,023
December 31, 2021
30-59 Days 60-89 Days Non-accrual Recorded
Investment
> 90 days
accruing Total Past
Due Current Total Loans Receivable Non-accrual loans with no related allowance
Mortgage loans:
Residential $ 7,229 1,131 6,072 — 14,432 1,188,206 1,202,638 6,072
Commercial 720 3,960 16,887 — 21,567 3,805,803 3,827,370 16,887
Multi-family — — 439 — 439 1,363,958 1,364,397 439
Construction — — 2,365 — 2,365 680,801 683,166 2,365
Total mortgage loans 7,949 5,091 25,763 — 38,803 7,038,768 7,077,571 25,763
Commercial loans 7,229 1,289 20,582 — 29,100 2,159,766 2,188,866 14,453
Consumer loans 649 228 1,682 — 2,559 324,883 327,442 1,682
Total gross loans $ 15,827 6,608 48,027 — 70,462 9,523,417 9,593,879 41,898


	June 30, 2023
	30-59 Days		60-89 Days	Non-accrual	Recorded Investment > 90 days accruing	Total Past Due	Current	Total Loans Receivable	Non-accrual loans with no related allowance
Mortgage loans:
Commercial	$	1,445	1,137	7,279	—	9,861	4,363,575	4,373,436	4,276
Multi-family	3,853		—	2,314	—	6,167	1,639,603	1,645,770	2,314
Construction	—		—	1,874	—	1,874	705,360	707,234	1,874
Residential	1,427		1,171	1,698	—	4,296	1,161,863	1,166,159	1,698
Total mortgage loans	6,725		2,308	13,165	—	22,198	7,870,401	7,892,599	10,162
Commercial loans	3,021		90	31,885	—	34,996	2,313,451	2,348,447	19,504
Consumer loans	957		147	878	—	1,982	299,324	301,306	878
Total gross loans	$	10,703	2,545	45,928	—	59,176	10,483,176	10,542,352	30,544


	December 31, 2022
	30-59 Days		60-89 Days	Non-accrual	Recorded Investment > 90 days accruing	Total Past Due	Current	Total Loans Receivable	Non-accrual loans with no related allowance
Mortgage loans:
Commercial	$	2,300	412	28,212	—	30,924	4,285,261	4,316,185	22,961
Multi-family	790		—	1,565	—	2,355	1,511,463	1,513,818	1,565
Construction	905		1,097	1,878	—	3,880	711,614	715,494	1,878
Residential	1,411		1,114	1,928	—	4,453	1,173,245	1,177,698	1,928
Total mortgage loans	5,406		2,623	33,583	—	41,612	7,681,583	7,723,195	28,332
Commercial loans	964		1,014	24,188	—	26,166	2,207,504	2,233,670	21,156
Consumer loans	885		147	738	—	1,770	303,010	304,780	739
Total gross loans	$	7,255	3,784	58,509	—	69,548	10,192,097	10,261,645	50,227

Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The principal amounts of these non-accrual loans were ~~$59.5~~$45.9 million and ~~$48.0~~$58.5 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Included in non-accrual loans were ~~$39.3~~$17.4 million and ~~$23.0~~$42.9 million

of loans which were less than 90 days past due at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. There were no loans 90 days or greater past due and still accruing interest at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

The activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):


Three months ended June 30,	Mortgage loans		Commercial loans	Consumer loans	Total
2023
Balance at beginning of period	$	63,195	27,117	2,446	92,758

Provision charge (benefit) to operations	6,742		3,769	(111)	10,400

Recoveries of loans previously charged-off	3		134	173	310
Loans charged-off	—		(1,313)	(82)	(1,395)
Balance at end of period	$	69,940	29,707	2,426	102,073

2022
Balance at beginning of period	$	50,096	23,799	2,380	76,275
Provision charge (benefit) to operations	5,593		(2,710)	117	3,000

Recoveries of loans previously charged-off	361		443	109	913
Loans charged-off	(986)		(145)	(41)	(1,172)
Balance at end of period	$	55,064	21,387	2,565	79,016


Six months ended June 30,	Mortgage loans		Commercial loans	Consumer loans	Total
2023
Balance at beginning of period	$	58,218	27,413	2,392	88,023
Cumulative effect of adopting Accounting Standards Update ("ASU") No. 2022-02	(510)		(43)	(41)	(594)

Provision charge (benefit) to operations	12,954		3,461	(15)	16,400
Recoveries of loans previously charged-off	6		301	258	565
Loans charged-off	(728)		(1,425)	(168)	(2,321)
Balance at end of period	$	69,940	29,707	2,426	102,073

2022
Balance at beginning of period	$	52,104	26,343	2,293	80,740
Provision charge (benefit) charge to operations	3,599		(7,115)	116	(3,400)

Recoveries of loans previously charged-off	371		2,304	275	2,950

Loans charged-off	(1,010)		(145)	(119)	(1,274)
Balance at end of period	$	55,064	21,387	2,565	79,016

For the three and six months ended June 30, 2023, the Company recorded a $10.4 million and a $16.4 million provision for credit losses on loans, respectively. The increase in provision was attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices over the expected life of the loan portfolio within our CECL model.

The following table summarizes the Company's gross charge-offs recorded during the three months ended June 30, 2023 by year of origination (in thousands):


	2023		2022	2021	2020	2019	Prior to 2019	Total Loans







Commercial loans	$	—	—	—	—	—	1,313	1,313
Consumer loans (1)	4		—	—	—	—	3	7
Total gross loans	$	4	—	—	—	—	1,316	1,320

(1) Duringthe three months ended June 30, 2023, charge-offs on consumer overdraft accounts totaled $75,000, which is not included in the table above.

The following table summarizes the Company's gross charge-offs recorded during the six months ended June 30, 2023 by year of origination (in thousands):


	2023		2022	2021	2020	2019	Prior to 2019	Total Loans

Mortgage loans:
Commercial	$	—	—	—	—	—	707	707


Residential	—		—	—	—	—	21	21
Total mortgage loans	—		—	—	—	—	728	728
Commercial loans	—		—	—	—	—	1,425	1,425
Consumer loans (1)	9		—	—	—	—	13	22
Total gross loans	$	9	—	—	—	—	2,166	2,175

(1) Duringthe six months ended June 30, 2023, charge-offs on consumer overdraft accounts totaled $146,000, which is not included in the table above.

The Company defines ~~an impaired~~a loan individually evaluated for impairment as a non-homogeneous loan greater than $1.0 million, for which, based on current information, it is not expected to collect all amounts due under the contractual terms of the loan agreement. ~~Impaired~~At June 30, 2023, there were 17 loans ~~also include all~~totaling $37.1 million, compared to 10 loans ~~modified as troubled debt restructurings (“TDRs”). An allowance~~totaling $42.8 million at December 31, 2022, that were individually evaluated for collateral-dependent impaired loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs. The Company uses third-party appraisals to determine the fair value of the underlying collateral in its analysis of collateral-dependent loans. A third-party appraisal is generally ordered as soon as a loan is designated as a collateral-dependent loan and updated annually, or more frequently if required.impairment.

A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans deemed collateral-dependent, the Company estimates expected credit losses based on the collateral’s fair value less any selling costs. A specific allocation of the allowance for credit losses is established for each collateral-dependent loan with a carrying balance greater than the collateral’s fair value, less estimated selling costs. In most cases, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less estimated selling costs. The Company uses third-party appraisals to determine the fair value of the underlying collateral in its analysis of collateral-dependent loans. A third-party appraisal is generally ordered as soon as a loan is designated as a collateral-dependent loan and updated annually, or more frequently if required. At each fiscal quarter end, if a loan is designated as collateral-dependent and the third-party appraisal has not yet been received, an evaluation of all available collateral is made using the best information available at the time, including rent rolls, borrower financial statements and tax returns, prior appraisals, management’s knowledge of the market and collateral, and internally prepared collateral valuations based upon market assumptions regarding vacancy and capitalization rates, each as and where applicable. Once the appraisal is received and reviewed, the specific reserves are adjusted to reflect the appraised value and evaluated for charge offs. The Company believes there have been no significant time lapses resulting from this process.

At ~~September~~June 30, 2022, there were 131 impaired loans totaling $65.7 million, of which 123 totaling $26.8 million were TDRs. Included in this total were 100 TDRs related to 97 borrowers totaling $17.2 million that were performing in accordance with their restructured terms and which continued to accrue interest at September 30, 2022. At December 31, 2021, there were 155 impaired loans totaling $52.3 million, of which 132 loans totaling $30.6 million were TDRs. Included in this total were 115 TDRs related to 111 borrowers totaling $21.9 million that were performing in accordance with their restructured terms and which continued to accrue interest at December 31, 2021.

~~At September 30, 2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~$29.3~~$14.6 million and ~~$18.2~~$24.0 million related to the fair value of ~~underlying~~ collateral-dependent ~~impaired~~ loans individually evaluated for impairment, respectively. These ~~collateral-dependent impaired~~ loans at ~~September~~June 30, ~~2022~~2023 consisted of ~~$28.3~~$14.6 million in commercial ~~loans, $895,000 in residential real estate loans, and $63,000 in consumer~~ loans. ~~The collateral for these impaired loans was primarily real estate.~~

~~The activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2022 and 2021 was as follows (in thousands):~~

Three months ended September 30, Mortgage loans Commercial loans Consumer loans Total
2022
Balance at beginning of period $ 55,064 21,387 2,566 79,017
Provision charge (benefit) to operations 4,991 3,381 28 8,400
Recoveries of loans previously charged-off 167 1,421 129 1,717
Loans charged-off — (410) (91) (501)
Balance at end of period $ 60,222 25,779 2,632 88,633
2021
Balance at beginning of period $ 55,469 21,262 4,228 80,959
Provision charge (benefit) to operations 626 963 (589) 1,000
Recoveries of loans previously charged-off 71 336 140 547
Loans charged-off (2,110) (263) (100) (2,473)
Balance at end of period $ 54,056 22,298 3,679 80,033

Nine months ended September 30, Mortgage loans Commercial loans Consumer loans Total
2022
Balance at beginning of period $ 52,104 26,343 2,293 80,740
Provision charge (benefit) to operations 8,589 (3,734) 145 5,000
Recoveries of loans previously charged-off 539 3,725 404 4,668
Loans charged-off (1,010) (555) (210) (1,775)
Balance at end of period $ 60,222 25,779 2,632 88,633
2021
Balance at beginning of period $ 68,307 27,084 6,075 101,466
Provision benefit to operations (11,760) (10,319) (2,621) (24,700)
Recoveries of loans previously charged-off 538 6,654 640 7,832
Loans charged-off (3,029) (1,121) (415) (4,565)
Balance at end of period $ 54,056 22,298 3,679 80,033

For the three and nine months ended September 30, 2022, the Company recorded an $8.4 million and a $5.0 million provision for credit losses on loans, respectively. The increase in the provision was largely a function of the weakened economic forecast, combined with an increase in total loans outstanding. The increase in the period-over-period provision for credit losses was largely a function of the significant favorable impact of the post-pandemic recovery resulting in a large negative provision taken in the prior year period, the current weakened economic forecast and an increase in total loans outstanding.

Loan modifications ~~for~~to borrowers experiencing financial ~~difficulties that are considered TDRs primarily involve lowering the monthly payments on such loans through either a reduction in~~difficulty may include interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. These modifications generally do not result in the forgiveness ofreductions, principal or ~~accrued interest.~~interest forgiveness, forbearance, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. In addition, management attempts to obtain additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue

interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

The following ~~tables present~~illustrates the most common loan modifications by loan classes offered by the Company that are required to be disclosed pursuant to the requirements of ASU 2022-02:


Loan Classes						Modification types
Commercial						Term extension, interest rate reductions, payment delay, or combination thereof. These modifications extend the term of the loan, lower the payment amount, or otherwise delay payments during a defined period for the purpose of providing borrowers additional time to return to compliance with the original loan term.

Residential Mortgage/ Home Equity						Forbearance period greater than six months. These modifications require reduced or no payments during the forbearance period for the purpose of providing borrowers additional time to return to compliance with the original loan term. As well as, term extension and rate adjustment. These modifications extend the term of the loan and provides for an adjustment to the interest rate, which reduces the monthly payment requirement.

Automobile/ Direct Installment						Term extension greater than three months. These modifications extend the term of the loan, which reduces the monthly payment requirement.

Effective January 1, 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a modified retrospective basis. Upon adoption of this guidance, the Company no longer establishes a specific reserve for loan modifications to borrowers experiencing financial difficulty. Instead, these loan modifications are included in their respective pool and a historical loss rate is applied to the current loan balance to arrive at the quantitative and qualitative baseline portion of the allowance for credit losses. As a result, The Company recorded a $594,000 reduction to the allowance for credit losses, which resulted in a $433,000 cumulative effect adjustment increase, net of tax to retained earnings.

There were no loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2023.

The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2023 (in thousands):


	Term Extension		Interest Rate Reduction	Interest Rate Reduction and Term Extension	% of Total Class of Loans and Leases







Commercial loans	$	3,771	—	1,250	0.21	%

Total gross loans	$	3,771	—	1,250	0.05	%

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2023 (in thousands):


	Weighted-Average Months of Term Extension	Weight-Average Rate Change






Commercial loans	10	0.28	%

Total gross loans	10	0.28	%

There were no loan modifications made to borrowers experiencing financial difficulty during the three or six months ended June 30, 2023, that subsequently defaulted.

The following table presents the aging analysis of loan modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2023 (in thousands):


	Current		30-59 Days Past Due	60-89 Days Past Due	90 days or more Past Due	Non- Accrual	Total







Commercial loans	$	5,021	—	—	—	—	5,021

Total gross loans	$	5,021	—	—	—	—	5,021

Prior to our adoption of ASU 2022-02, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. However, our TDR accounting described herein was suspended for most of our loss mitigation activities through our election to account for certain eligible loss mitigation activities occurring between March 2020 and January 1, 2022 under the COVID-19 relief granted pursuant to the CARES Act and the Consolidated Appropriations Act of 2021. Effective January 1, 2023, we adopted ASU 2022-02, which eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023.

The following table presents the number of loans modified as TDRs during the three and ~~nine~~six months ended ~~September~~June 30, 2022, ~~and 2021,~~ along with their balances immediately prior to the modification date and post-modification as of ~~September~~June 30, 2022 ~~and 2021~~ (in thousands):


		For the three months ended											For the three and six months ended
		September 30, 2022					September 30, 2021						June 30, 2022
Troubled Debt Restructurings	Troubled Debt Restructurings	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Troubled Debt Restructurings	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Mortgage loans:	Mortgage loans:											Mortgage loans:
Residential	Residential	—	$	—	$	—	2	$	375	$	369	Residential	2	$	265	206

Multi Family												Multi Family	1	1,618		1,601
Total mortgage loans												Total mortgage loans	3	1,883		1,807
Commercial loans												Commercial loans	2	378		274

Total mortgage loans		—	—		—		2	375		369

Consumer loans		1	108		88			—		—
Total restructured loans	Total restructured loans	1	$	108	$	88	2	$	375	$	369	Total restructured loans	5	$	2,261	2,081

Durin

For the nine months ended
September 30, 2022 September 30, 2021
Troubled Debt Restructurings Number of
Loans Pre-Modification
Outstanding
Recorded
Investment Post-Modification
Outstanding
Recorded Investment Number of
Loans Pre-Modification
Outstanding
Recorded Investment Post-Modification
Outstanding
Recorded Investment
Mortgage loans:
Residential 2 $ 265 $ 204 3 $ 546 $ 538
Multi-Family 1 1,618 1,583 — — —
Total mortgage loans 3 1,883 1,787 3 546 538
Commercial loans 2 378 273 4 2,940 2,318
Consumer loans 1 108 88 — — —
Total restructured loans 6 $ 2,369 $ 2,148 7 $ 3,486 $ 2,856

~~All TDRs are impaired loans, which are individually evaluated for impairment. During~~g the ~~nine~~three and six months ended ~~September~~June 30, 2022, $921,000 of charge-offs were recorded on collateral-dependent impaired loans. ~~During the three and nine months ended September 30, 2021, $2.1 million and $3.5 million of charge-offs were recorded on collateral-dependent impaired loans.~~

For the three and nine months ended September 30, 2022, the TDRs presented in the preceding tables had a weighted average modified interest rate of 8.25% and 4.42%, respectively, compared to a weighted average rate of 6.75% and 4.41%, respectively, prior to modification.

There was one loan totaling $209,000 which had a payment default (90 days or more past due) ~~which was~~for a loan modified as a TDR within the 12 month period ending ~~September~~June 30, ~~2022.~~2023. For TDRs that subsequently ~~default,~~defaulted, the Company ~~determines~~determined the amount of the allowance for the respective loans in accordance with the accounting policy for the allowance for credit losses on loans individually evaluated for impairment.

As allowed by CECL, loans acquired by the Company that experience more-than-insignificant deterioration in credit quality after origination, are classified as Purchased Credit Deteriorated ("PCD") loans. At ~~September~~June 30, ~~2022,~~2023, the balance of PCD loans totaled ~~$207.4~~$173.3 million with a related allowance for credit losses of ~~$2.4~~$1.6 million. The balance of PCD loans at December 31, ~~2021~~2022 was ~~$246.9~~$193.0 million with a related allowance for credit losses of ~~$2.8~~$1.7 million.

~~The following table presents loans individually evaluated for impairment by class and loan category (in thousands):~~

September 30, 2022 December 31, 2021
Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized
Loans with no related allowance
Mortgage loans:
Residential $ 10,047 7,755 — 8,134 281 12,326 9,814 — 9,999 423
Commercial 16,799 14,604 — 13,617 48 15,310 14,685 — 15,064 63
Multi-family 1,618 1,583 — 1,617 12 — — — — —
Construction 1,101 1,101 — 1,101 — 1,656 1,588 — 1,643 30
Total 29,565 25,043 — 24,469 341 29,292 26,087 — 26,706 516
Commercial loans 8,338 8,113 — 8,355 18 9,845 7,254 — 7,714 33
Consumer loans 1,310 760 — 880 38 1,389 853 — 1,613 115
Total impaired loans $ 39,213 33,916 — 33,704 397 40,526 34,194 — 36,033 664
Loans with an allowance recorded
Mortgage loans:
Residential $ 7,155 6,843 743 6,926 197 7,994 7,652 858 7,742 278
Commercial 19,143 19,143 2,134 19,162 35 871 871 17 894 48
Multi-family — — — — — — — — — —
Total 26,298 25,986 2,877 26,088 232 8,865 8,523 875 8,636 326
Commercial loans 6,163 5,452 1,275 8,651 87 9,498 9,166 3,358 8,304 257
Consumer loans 325 306 46 312 9 391 371 51 379 18
Total impaired loans $ 32,786 31,744 4,198 35,051 328 18,754 18,060 4,284 17,319 601
Total impaired loans
Mortgage loans:
Residential $ 17,202 14,598 743 15,060 478 20,320 17,466 858 17,741 701
Commercial 35,942 33,747 2,134 32,779 83 16,181 15,556 17 15,958 111
Multi-family 1,618 1,583 — 1,617 12 — — — — —
Construction 1,101 1,101 — 1,101 — 1,656 1,588 — 1,643 30
Total 55,863 51,029 2,877 50,557 573 38,157 34,610 875 35,342 842
Commercial loans 14,501 13,565 1,275 17,006 105 19,343 16,420 3,358 16,018 290
Consumer loans 1,635 1,066 46 1,192 47 1,780 1,224 51 1,992 133
Total impaired loans $ 71,999 65,660 4,198 68,755 725 59,280 52,254 4,284 53,352 1,265

Specific allocations of the allowance for credit losses attributable to impaired loans totaled $4.2 million at September 30, 2022 and $4.3 million at December 31, 2021. At September 30, 2022 and December 31, 2021, impaired loans for which there was no related allowance for credit losses totaled $33.9 million and $34.2 million, respectively. The average balance of impaired loans for the nine months ended September 30, 2022 and the twelve months ended December 31, 2021 was $68.8 million and $53.4 million, respectively.

Management utilizes an internal nine-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (watch) or 6 (special mention). Loans with adverse classifications (substandard, doubtful or loss) are rated 7, 8 or 9, respectively. Commercial mortgage, commercial, multi-family and construction loans are rated individually, and each lending officer is responsible for risk rating loans in their portfolio. These risk ratings are then reviewed by the department manager and/or the Chief Lending Officer and by the Credit Department. The risk ratings are also reviewed periodically through loan review examinations which are currently performed

by an independent third-party. Reports by the independent third-party are presented to the Audit Committee of the Board of Directors.

The Company participated in the Paycheck Protection Program (“PPP”) through the United States Department of the Treasury and Small Business ~~Administration ("SBA"). The~~Administration. PPP loans ~~are~~were fully guaranteed by the SBA and ~~may be~~were eligible for forgiveness by the SBA to the extent that the proceeds ~~are~~were used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up

to 24 weeks after the loan was made as long as certain conditions ~~are~~were met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA ~~will~~are to be repaid by the SBA to the Company. ~~For both~~Eligibility ended for this program in May of 2021. PPP loans are included in our commercial loan portfolio. Under the ~~initial round and second round of~~ PPP, the Company ~~had~~ secured 2,067 PPP loans for its customers totaling $682.0 million. As of ~~September~~June 30, ~~2022, 2,052~~2023, 2,054 PPP loans totaling ~~$676.4~~$679.4 million were ~~forgiven. At September 30, 2022,~~forgiven and repaid by the SBA. The balance of PPP loans ~~totaled $5.6 million, and are included in the commercial loan portfolio.~~at June 30, 2023 was $2.6 million.

The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		Gross Loans Held by Investment by Year of Origination at September 30, 2022											Gross Loans Held for Investment by Year of Origination at June 30, 2023
		2022		2021	2020	2019	2018	Prior to 2018	Revolving Loans	Revolving loans to term loans	Total Loans
Residential (1)
Special mention		$	—	—	—	—	—	302	—	—	302
Substandard		—		—	—	—	271	5,403	—	—	5,674
Doubtful		—		—	—	—	—	—	—	—	—
Loss		—		—	—	—	—	—	—	—	—
Total criticized and classified		—		—	—	—	271	5,705	—	—	5,976
Pass/Watch		120,003		215,512	215,111	98,249	59,352	455,165	—	—	1,163,392
Total residential		$	120,003	215,512	215,111	98,249	59,623	460,870	—	—	1,169,368
													2023		2022	2021	2020	2019	Prior to 2019	Revolving Loans	Revolving loans to term loans	Total Loans
Commercial Mortgage	Commercial Mortgage											Commercial Mortgage
Special mention	Special mention	$	—	—	827	28,404	47,425	14,639	—	—	91,295	Special mention	$	—	—	—	2,713	2,346	33,436	485	—	38,980
Substandard	Substandard	—		—	—	—	25,552	18,782	720	—	45,054	Substandard	—		—	—	376	—	7,785	434	—	8,595
Doubtful	Doubtful	—		—	—	—	—	—	—	—	—	Doubtful	—		—	—	—	—	—	—	—	—
Loss	Loss	—		—	—	—	—	—	—	—	—	Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	Total criticized and classified	—		—	827	28,404	72,977	33,421	720	—	136,349	Total criticized and classified	—		—	—	3,089	2,346	41,221	919	—	47,575
Pass/Watch	Pass/Watch	764,406		636,635	584,856	559,283	236,897	1,208,073	95,448	15,587	4,101,185	Pass/Watch	290,713		910,869	670,781	511,239	513,150	1,318,607	96,163	14,339	4,325,861

Total commercial mortgage	Total commercial mortgage	$	764,406	636,635	585,683	587,687	309,874	1,241,494	96,168	15,587	4,237,534	Total commercial mortgage	$	290,713	910,869	670,781	514,328	515,496	1,359,828	97,082	14,339	4,373,436

Multi-family	Multi-family											Multi-family
Special mention	Special mention	$	—	—	—	—	—	1,654	—	—	1,654	Special mention	$	—	—	—	—	—	9,608	—	—	9,608
Substandard	Substandard	—		—	—	—	—	2,381	—	—	2,381	Substandard	—		—	—	—	—	3,211	—	—	3,211
Doubtful	Doubtful	—		—	—	—	—	—	—	—	—	Doubtful	—		—	—	—	—	—	—	—	—
Loss	Loss	—		—	—	—	—	—	—	—	—	Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	Total criticized and classified	—		—	—	—	—	4,035	—	—	4,035	Total criticized and classified	—		—	—	—	—	12,819	—	—	12,819
Pass/Watch	Pass/Watch	125,035		150,711	283,823	201,311	188,765	522,717	854	1,151	1,474,367	Pass/Watch	132,991		170,856	198,427	279,117	232,748	614,456	3,223	1,133	1,632,951
Total multi-family	Total multi-family	$	125,035	150,711	283,823	201,311	188,765	526,752	854	1,151	1,478,402	Total multi-family	$	132,991	170,856	198,427	279,117	232,748	627,275	3,223	1,133	1,645,770

Construction	Construction											Construction
Special mention	Special mention	$	—	—	—	—	19,466	905	—	—	20,371	Special mention	$	—	—	—	—	—	—	—	—	—
Substandard	Substandard	—		—	—	2,197	777	—	—	—	2,974	Substandard	—		—	—	—	1,097	777	—	—	1,874
Doubtful	Doubtful	—		—	—	—	—	—	—	—	—	Doubtful	—		—	—	—	—	—	—	—	—
Loss	Loss	—		—	—	—	—	—	—	—	—	Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified												Total criticized and classified	—		—	—	—	1,097	777	—	—	1,874
Pass/Watch												Pass/Watch	33,795		276,155	266,520	105,078	8,456	13,346		2,010	705,360
Total construction												Total construction	$	33,795	276,155	266,520	105,078	9,553	14,123	—	2,010	707,234

Residential (1)												Residential (1)
Special mention												Special mention	$	—	—	—	—	—	1,172	—	—	1,172
Substandard												Substandard	—		—	—	—	—	2,142	—	—	2,142
Doubtful												Doubtful	—		—	—	—	—	—	—	—	—
Loss												Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified												Total criticized and classified	—		—	—	—	—	3,314	—	—	3,314
Pass/Watch												Pass/Watch	42,524		147,449	205,949	205,123	92,537	469,263	—	—	1,162,845
Total residential												Total residential	$	42,524	147,449	205,949	205,123	92,537	472,577	—	—	1,166,159

Gross Loans Held by Investment by Year of Origination
at September 30, 2022
2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans
Total criticized and classified — — — 2,197 20,243 905 — — 23,345
Pass/Watch 108,427 337,461 91,180 81,115 18,101 92 — 7,019 643,395
Total construction $ 108,427 337,461 91,180 83,312 38,344 997 — 7,019 666,740
Total Mortgage
Special mention $ — — 827 28,404 66,891 17,500 — — 113,622
Substandard — — — 2,197 26,600 26,566 720 — 56,083
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified — — 827 30,601 93,491 44,066 720 — 169,705
Pass/Watch 1,117,871 1,340,319 1,174,970 939,958 503,115 2,186,047 96,302 23,757 7,382,339
Total Mortgage $ 1,117,871 1,340,319 1,175,797 970,559 596,606 2,230,113 97,022 23,757 7,552,044
Commercial
Special mention $ — 7,697 374 220 13,712 5,596 5,117 217 32,933
Substandard — — 10,877 4,422 5,228 15,507 9,641 364 46,039
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified — 7,697 11,251 4,642 18,940 21,103 14,758 581 78,972
Pass/Watch 286,447 321,957 177,100 167,784 109,828 542,716 472,645 33,135 2,111,612
Total commercial $ 286,447 329,654 188,351 172,426 128,768 563,819 487,403 33,716 2,190,584
Consumer (1)
Special mention $ — — — — — 149 208 22 379
Substandard — — — — 111 188 5 — 304
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified — — — — 111 337 213 22 683
Pass/Watch 26,454 21,940 2,494 17,411 16,861 91,749 124,067 14,888 315,864
Total consumer $ 26,454 21,940 2,494 17,411 16,972 92,086 124,280 14,910 316,547
Total Loans
Special mention $ — 7,697 1,201 28,624 80,603 23,245 5,325 239 146,934
Substandard — — 10,877 6,619 31,939 42,261 10,366 364 102,426
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified — 7,697 12,078 35,243 112,542 65,506 15,691 603 249,360
Pass/Watch 1,430,772 1,684,216 1,354,564 1,125,153 629,804 2,820,512 693,014 71,780 9,809,815

Gross Loans Held by Investment by Year of Origination
at September 30, 2022
2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans
Total gross loans $ 1,430,772 1,691,913 1,366,642 1,160,396 742,346 2,886,018 708,705 72,383 10,059,175


	Gross Loans Held for Investment by Year of Origination at June 30, 2023
	2023		2022	2021	2020	2019	Prior to 2019	Revolving Loans	Revolving loans to term loans	Total Loans
Total Mortgage
Special mention	$	—	—	—	2,713	2,346	44,216	485	—	49,760
Substandard	—		—	—	376	1,097	13,915	434	—	15,822
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	—		—	—	3,089	3,443	58,131	919	—	65,582
Pass/Watch	500,023		1,505,329	1,341,677	1,100,557	846,891	2,415,672	99,386	17,482	7,827,017
Total Mortgage	$	500,023	1,505,329	1,341,677	1,103,646	850,334	2,473,803	100,305	17,482	7,892,599

Commercial
Special mention	$	—	70	387	577	54	11,490	9,714	—	22,292
Substandard	—		—	14,966	17,133	3,974	14,473	13,837	352	64,735
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	—		70	15,353	17,710	4,028	25,963	23,551	352	87,027
Pass/Watch	154,852		379,855	308,290	148,648	151,902	552,747	538,651	26,475	2,261,420
Total commercial	$	154,852	379,925	323,643	166,358	155,930	578,710	562,202	26,827	2,348,447

Consumer (1)
Special mention	$	—	—	—	—	—	145	—	2	147
Substandard	—		—	—	—	—	4	709	90	803
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—

Total criticized and classified	—		—	—	—	—	149	709	92	950
Pass/Watch	14,243		29,064	19,513	3,328	15,341	93,900	112,425	12,542	300,356
Total consumer	$	14,243	29,064	19,513	3,328	15,341	94,049	113,134	12,634	301,306

Total Loans
Special mention	$	—	70	387	3,290	2,400	55,851	10,199	2	72,199
Substandard	—		—	14,966	17,509	5,071	28,392	14,980	442	81,360
Doubtful	—		—	—	—	—	—	—	—	—

Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	—		70	15,353	20,799	7,471	84,243	25,179	444	153,559
Pass/Watch	669,118		1,914,248	1,669,480	1,252,533	1,014,134	3,062,319	750,462	56,499	10,388,793
Total gross loans	$	669,118	1,914,318	1,684,833	1,273,332	1,021,605	3,146,562	775,641	56,943	10,542,352

(1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan.

Gross Loans Held by Investment by Year of Origination
at December 31, 2021
2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Revolving loans to term loans Total Loans
Residential (1)
Special mention $ — — — — 697 434 — — 1,131
Substandard — — — 280 166 8,569 — — 9,015
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified — — — 280 863 9,003 — — 10,146
Pass/Watch 229,106 235,949 113,206 67,493 75,906 470,832 — — 1,192,492
Total residential $ 229,106 235,949 113,206 67,773 76,769 479,835 — — 1,202,638
Commercial Mortgage
Special mention $ — 2,624 28,706 22,296 9,657 26,668 1,094 — 91,045
Substandard — — 18 34,260 7,352 34,356 799 — 76,785
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified — 2,624 28,724 56,556 17,009 61,024 1,893 — 167,830
Pass/Watch 655,105 600,030 589,578 298,665 430,947 952,746 101,618 30,851 3,659,540
Total commercial mortgage $ 655,105 602,654 618,302 355,221 447,956 1,013,770 103,511 30,851 3,827,370
Multi-family
Special mention $ — — — — 3,053 271 — — 3,324
Substandard — 439 — — 945 — — 1,384
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified — 439 — — 3,053 1,216 — — 4,708
Pass/Watch 154,419 294,716 166,558 173,583 117,654 448,710 2,880 1,169 1,359,689
Total multi-family $ 154,419 295,155 166,558 173,583 120,707 449,926 2,880 1,169 1,364,397
Construction
Special mention $ — 1,125 — — — — — — 1,125
Substandard — — — 2,365 — — — — 2,365
Doubtful — — — — — — — — —
Loss — — — — — — — — —


	Gross Loans Held for Investment by Year of Origination at December 31, 2022
	2022		2021	2020	2019	2018	Prior to 2018	Revolving Loans	Revolving loans to term loans	Total Loans
Commercial Mortgage
Special mention	$	—	—	3,071	26,809	52,509	14,740	—	—	97,129


	Gross Loans Held for Investment by Year of Origination at December 31, 2022
	2022		2021	2020	2019	2018	Prior to 2018	Revolving Loans	Revolving loans to term loans	Total Loans
Substandard	—		—	—	—	18,020	11,774	434	—	30,228
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	—		—	3,071	26,809	70,529	26,514	434	—	127,357
Pass/Watch	951,367		630,584	567,448	546,474	218,620	1,164,854	94,716	14,765	4,188,828
Total commercial mortgage	$	951,367	630,584	570,519	573,283	289,149	1,191,368	95,150	14,765	4,316,185

Multi-family
Special mention	$	—	—	—	—	—	9,730	—	—	9,730
Substandard	—		—	—	—	—	2,356	—	—	2,356
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	—		—	—	—	—	12,086	—	—	12,086
Pass/Watch	142,550		150,293	282,228	234,953	187,499	502,177	887	1,145	1,501,732
Total multi-family	$	142,550	150,293	282,228	234,953	187,499	514,263	887	1,145	1,513,818

Construction
Special mention	$	—	—	—	—	19,728	905	—	—	20,633
Substandard	—		—	—	2,197	777	—	—	—	2,974
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	—		—	—	2,197	20,505	905	—	—	23,607
Pass/Watch	168,674		362,542	103,067	38,639	16,917	62		1,986	691,887
Total construction	$	168,674	362,542	103,067	40,836	37,422	967	—	1,986	715,494

Residential (1)
Special mention	$	—	—	—	—	—	1,114	—	—	1,114
Substandard	—		—	—	—	264	4,417	—	—	4,681
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	—		—	—	—	264	5,531	—	—	5,795
Pass/Watch	151,077		212,697	211,445	95,872	58,226	442,586	—	—	1,171,903
Total residential	$	151,077	212,697	211,445	95,872	58,490	448,117	—	—	1,177,698

Total Mortgage
Special mention	$	—	—	3,071	26,809	72,237	26,489	—	—	128,606
Substandard	—		—	—	2,197	19,061	18,547	434	—	40,239
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	—		—	3,071	29,006	91,298	45,036	434	—	168,845

Gross Loans Held by Investment by Year of Origination
at December 31, 2021
2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Revolving loans to term loans Total Loans
Total criticized and classified — 1,125 — 2,365 — — — — 3,490
Pass/Watch 173,843 176,182 219,331 94,363 9,604 103 6,250 679,676
Total construction $ 173,843 177,307 219,331 96,728 9,604 103 — 6,250 683,166
Total Mortgage
Special mention $ — 3,749 28,706 22,296 13,407 27,373 1,094 — 96,625
Substandard — 439 18 36,905 7,518 43,870 799 — 89,549
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified — 4,188 28,724 59,201 20,925 71,243 1,893 — 186,174
Pass/Watch 1,212,473 1,306,877 1,088,673 634,104 634,111 1,872,391 104,498 38,270 6,891,397
Total Mortgage $ 1,212,473 1,311,065 1,117,397 693,305 655,036 1,943,634 106,391 38,270 7,077,571
Commercial
Special mention $ 1,232 2,662 2,816 3,263 24,418 40,561 8,389 2,155 85,496
Substandard — 736 5,517 5,860 5,747 64,807 13,622 1,821 98,110
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified 1,232 3,398 8,333 9,123 30,165 105,368 22,011 3,976 183,606
Pass/Watch 415,924 222,132 179,193 154,440 149,567 489,051 355,097 39,856 2,005,260
Total commercial $ 417,156 225,530 187,526 163,563 179,732 594,419 377,108 43,832 2,188,866
Consumer (1)
Special mention $ — — — — — 109 25 94 228
Substandard — — — 116 2 1,514 6 — 1,638
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified — — — 116 2 1,623 31 94 1,866
Pass/Watch 25,140 4,503 24,272 21,046 15,804 99,106 119,347 16,358 325,576
Total consumer $ 25,140 4,503 24,272 21,162 15,806 100,729 119,378 16,452 327,442
Total Loans
Special mention $ 1,232 6,411 31,522 25,559 37,825 68,043 9,508 2,249 182,349
Substandard — 1,175 5,535 42,881 13,267 110,191 14,427 1,821 189,297
Doubtful — — — — — — — — —
Loss — — — — — — — — —
Total criticized and classified 1,232 7,586 37,057 68,440 51,092 178,234 23,935 4,070 371,646
Pass/Watch 1,653,537 1,533,512 1,292,138 809,590 799,482 2,460,548 578,942 94,484 9,222,233

Gross Loans Held by Investment by Year of Origination
at December 31, 2021
2021 2020 2019 2018 2017 Prior to 2017 Revolving Loans Revolving loans to term loans Total Loans
Total gross loans $ 1,654,769 1,541,098 1,329,195 878,030 850,574 2,638,782 602,877 98,554 9,593,879


	Gross Loans Held for Investment by Year of Origination at December 31, 2022
	2022		2021	2020	2019	2018	Prior to 2018	Revolving Loans	Revolving loans to term loans	Total Loans
Pass/Watch	1,413,668		1,356,116	1,164,188	915,938	481,262	2,109,679	95,603	17,896	7,554,350
Total Mortgage	$	1,413,668	1,356,116	1,167,259	944,944	572,560	2,154,715	96,037	17,896	7,723,195

Commercial
Special mention	$	75	1,148	444	201	10,156	4,379	14,530	140	31,073
Substandard	—		7,605	10,230	4,391	3,561	13,734	7,604	364	47,489
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	75		8,753	10,674	4,592	13,717	18,113	22,134	504	78,562
Pass/Watch	377,662		320,334	162,175	161,150	87,396	522,798	492,717	30,876	2,155,108
Total commercial	$	377,737	329,087	172,849	165,742	101,113	540,911	514,851	31,380	2,233,670

Consumer (1)
Special mention	$	—	—	—	—	—	146	—	—	146
Substandard	—			8	—	109	332	209	—	658
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	—		—	8	—	109	478	209	—	804
Pass/Watch	30,132		20,671	2,909	16,682	16,156	88,173	115,777	13,476	303,976
Total consumer	$	30,132	20,671	2,917	16,682	16,265	88,651	115,986	13,476	304,780

Total Loans
Special mention	$	75	1,148	3,515	27,010	82,393	31,014	14,530	140	159,825
Substandard	—		7,605	10,238	6,588	22,731	32,613	8,247	364	88,386
Doubtful	—		—	—	—	—	—	—	—	—
Loss	—		—	—	—	—	—	—	—	—
Total criticized and classified	75		8,753	13,753	33,598	105,124	63,627	22,777	504	248,211
Pass/Watch	1,821,462		1,697,121	1,329,272	1,093,770	584,814	2,720,650	704,097	62,248	10,013,434
Total gross loans	$	1,821,537	1,705,874	1,343,025	1,127,368	689,938	2,784,277	726,874	62,752	10,261,645

(1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan.

Note 5. Deposits

Deposits at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are summarized as follows (in thousands):


		September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Savings	Savings	$	1,501,857	1,460,541	Savings	$	1,275,262	1,438,583
Money market	Money market	2,395,591		2,592,523	Money market	2,272,648		2,542,160
NOW	NOW	3,425,921		3,722,198	NOW	3,334,509		3,186,926
Non-interest bearing	Non-interest bearing	2,682,127		2,766,235	Non-interest bearing	2,358,372		2,643,919
Certificates of deposit	Certificates of deposit	680,109		692,515	Certificates of deposit	1,020,329		751,436
Total deposits	Total deposits	$	10,685,605	11,234,012	Total deposits	$	10,261,120	10,563,024

Note 6. Borrowed Funds

Borrowed funds at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 are summarized as follows (in thousands):


		September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Securities sold under repurchase agreements	Securities sold under repurchase agreements	$	106,296	116,760	Securities sold under repurchase agreements	$	82,470	98,000
FHLB overnight borrowings		406,000		—
FHLB line of credit					FHLB line of credit	179,000		486,000
FHLB advances	FHLB advances	551,306		510,014	FHLB advances	1,588,244		753,370

Total borrowed funds	Total borrowed funds	$	1,063,602	626,774	Total borrowed funds	$	1,849,714	1,337,370

At ~~September~~June 30, ~~2022,~~2023, FHLB advances were at fixed rates and mature between ~~October 2022~~July 2023 and ~~July 2025,~~September 2026, and at December 31, ~~2021,~~2022, FHLB advances were at fixed rates with maturities between January ~~2022~~2023 and July 2025. These advances are secured by loans receivable under a blanket collateral agreement.

Scheduled maturities of FHLB advances and overnight borrowings at ~~September~~June 30, ~~2022~~2023 are as follows (in thousands):


	~~2022~~2023
Due in one year or less	$	~~544,508~~1,020,648
Due after one year through two years	~~138,538~~514,492
Due after two years through three years	~~249,260~~174,660
Due after three years through four years	~~25,000~~57,444

Thereafter	—
Total FHLB advances and overnight borrowings	$	~~957,306~~1,767,244

Scheduled maturities of securities sold under repurchase agreements at ~~September~~June 30, ~~2022~~2023 are as follows (in thousands):


	~~2022~~2023
Due in one year or less	$	~~106,296~~82,470




Thereafter	—
Total securities sold under repurchase agreements	$	~~106,296~~82,470

The following tables set forth certain information as to borrowed funds for the periods ended ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		Maximum balance		Average balance	Weighted average interest rate			Maximum balance		Average balance	Weighted average interest rate
September 30, 2022
June 30, 2023							June 30, 2023
Securities sold under repurchase agreements	Securities sold under repurchase agreements	$	120,833	114,295	0.34	%	Securities sold under repurchase agreements	$	99,669	93,066	1.41	%
FHLB overnight borrowings	FHLB overnight borrowings	406,000		90,726	2.50		FHLB overnight borrowings	402,000		223,980	4.87
FHLB advances	FHLB advances	625,763		458,344	0.82		FHLB advances	1,588,245		1,125,698	2.78

December 31, 2021
December 31, 2022							December 31, 2022
Securities sold under repurchase agreements	Securities sold under repurchase agreements	$	132,005	116,158	0.07	%	Securities sold under repurchase agreements	$	125,506	113,550	0.38	%
FHLB overnight borrowings	FHLB overnight borrowings	—		205	0.34		FHLB overnight borrowings	486,000		139,012	3.32
FHLB advances	FHLB advances	941,939		673,014	1.27		FHLB advances	753,370		503,713	0.85

Securities sold under repurchase agreements include arrangements with deposit customers of the Bank to sweep funds into short-term borrowings. The Bank uses available for sale debt securities to pledge as collateral for the repurchase agreements.

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, available for sale debt securities pledged as collateral for repurchase agreements totaled ~~$120.0~~$95.5 million and ~~$136.0~~$116.5 million, respectively.

Interest expense on borrowings for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 amounted to ~~$2.5~~$14.1 million and ~~$4.8~~$21.6 million, respectively. Interest expense on borrowings for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 amounted to ~~$1.8~~$1.1 million and ~~$7.1~~$2.3 million, respectively.

Note 7. Components of Net Periodic Benefit Cost

The Bank has a noncontributory defined benefit pension plan covering its full-time employees who had attained age 21 with at least one year of service as of April 1, 2003. The pension plan was frozen on April 1, 2003. All participants in the Plan are 100% vested. The pension plan’s assets are invested in investment funds and group annuity contracts currently managed by the Principal Financial Group and Allmerica Financial.

In addition to pension benefits, certain health care and life insurance benefits are currently made available to certain of the Bank’s retired employees. The costs of such benefits are accrued based on actuarial assumptions from the date of hire to the date the employee is fully eligible to receive the benefits. Effective January 1, 2003, eligibility for retiree health care benefits was frozen as to new entrants, and benefits were eliminated for employees with less than ten years of service as of December 31, 2002. Effective January 1, 2007, eligibility for retiree life insurance benefits was frozen as to new entrants and retiree life insurance benefits were eliminated for employees with less than ten years of service as of December 31, 2006.

Net periodic ~~(decrease)~~(benefit) increase ~~in benefit~~ cost for pension benefits and other post-retirement benefits for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 includes the following components (in thousands):
Three months ended September 30, Nine months ended September 30,
Pension benefits Other post-retirement benefits Pension benefits Other post-retirement benefits
2022 2021 2022 2021 2022 2021 2022 2021
Service cost $ — — 7 8 $ — — 21 26
Interest cost 214 198 111 106 642 594 333 318
Expected return on plan assets (864) (807) — — (2,592) (2,421) — —
Amortization of prior service cost — — — — — — — —
Amortization of the net loss (gain) — 118 (326) (267) — 354 (978) (803)
Net periodic (decrease) increase in benefit cost $ (650) (491) (208) (153) $ (1,950) (1,473) (624) (459)


	Three months ended June 30,					Six months ended June 30,
	Pension benefits			Other post-retirement benefits		Pension benefits			Other post-retirement benefits
	2023		2022	2023	2022	2023		2022	2023	2022
Service cost	$	—	—	3	7	$	—	—	6	14
Interest cost	302		214	150	111	604		428	300	222
Expected return on plan assets	(706)		(864)	—	—	(1,412)		(1,728)	—	—
Amortization of prior service cost	—		—	—	—	—		—	—	—
Amortization of the net loss (gain)	177		—	(533)	(326)	354		—	(1,066)	(652)
Net periodic (decrease) increase in benefit cost	$	(227)	(650)	(380)	(208)	$	(454)	(1,300)	(760)	(416)

In its consolidated financial statements for the year ended December 31, ~~2021,~~2022, the Company previously disclosed that it does not expect to contribute to the pension plan in ~~2022.~~2023. As of ~~September~~June 30, ~~2022,~~2023, no contributions have been made to the pension plan.

The changes in net periodic benefit cost for pension benefits and other post-retirement benefits for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 were calculated using the January 1, ~~2022~~2023 pension and other post-retirement benefits actuarial valuations.

Note 8. Impact of Recent Accounting Pronouncements

Accounting Pronouncements ~~Not Yet~~ Adopted This Year

In March 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-02, "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," which addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancing and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities that have adopted ASU 2016-13, ASU 2022-02 iswas effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption iswas permitted if an entity ~~has~~had adopted ASU 2016-13. The Company ~~continues~~adopted this ASU on January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to ~~assess~~be recorded with previously applicable GAAP. The Company recorded a $594,000 reduction to the ~~impact that this guidance will have on the Company’s consolidated financial statements.~~allowance for credit losses, which resulted in a $433,000 cumulative effect adjustment increase, net of tax, to retained earnings.

In March 2022, the FASB issued ~~ASU~~Accounting Standards Update (ASU) 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging -– Portfolio Layer ~~Method."~~ Method~~This ASU clarifies the~~. The purpose of this updated guidance ~~in ASC 815 on fair value~~is to further align risk management objectives with hedge accounting results on the application of ~~interest rate risk for portfolios of financial assets. The ASU amends~~ the ~~guidance~~last-of-layer method, which was first introduced in ASU 2017-12, ~~that, among other things, established the “last-of-layer” method~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method and addresses feedback from stakeholders regarding its application. Under current guidance, the last-of-layer method enables an entity to apply fair value hedging to a stated amount of a closed portfolio of prepayable financial assets (or one or more beneficial interests secured by a portfolio of prepayable financial instruments) without having to consider prepayment risk or credit risk when measuring those assets. ASU 2022-01 expands the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and non prepayable financial assets. This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same method to similar hedging strategies. Also, ASU 2022-01 expands the current model to explicitly allow entities to designate multiple layers in a single portfolio as individual hedged items. This allows entities to designate multiple hedging relationships with a single closed portfolio, and therefore a larger portion of the interest rate risk associated with such a portfolio is eligible to be hedged. ASU 2022-01 also addresses questions about the types of derivatives that could be used as the hedging instrument in potential multiple-layer hedges. Under ASU 2022-01, an entity has the flexibility to use any type of derivative or combination of derivatives (e.g., spot-starting constant-notional swaps with different term lengths, a combination of spot-starting and forward-starting constant-notional swaps, amortizing-notional swaps) by applying the multiple-layer model that aligns with its risk management strategy. ASU 2022-01 expands and clarifies the current guidance on accounting for fair value hedge basis adjustments under the portfolio layer method for both single-layer and multiple-layer hedges. For public business entities,Hedging Activities. ASU 2022-01 is effective for public business entities for fiscal years beginning after December 15, 2022, ~~including~~with early adoption in the interim ~~periods within~~period permitted. The Company adopted this standard on January 1, 2023 on a prospective basis, with no impact to the consolidated financial statements.

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~~those fiscal years. Early adoption is permitted if an entity has adopted ASU 2017-12. This standard is not expected to have a material impact on the Company's consolidated financial statements.~~Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)," which provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope ~~guidance~~guidance: (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be ~~amortized~~amortized; and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or re-measurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company anticipates this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than the extinguishment of the old contract resulting in writing off unamortized fees/costs. In addition, in January 2021, the FASB issued ASU No. 2021-01 “Reference Rate Reform — Scope,” which clarified the scope of ASC 848 relating to contract modifications. In the fourth quarter of 2019, the Company formed a cross-functional team to develop transition plans for the LIBOR ~~transition~~cessation to address potential revisions to documentation, as well as customer management and communication, internal training, financial, operational and risk management implications, and legal and contract management. The working group is comprised of individuals from various functional areas including lending, risk management, finance and credit, among others. In addition, the Company has engaged with its regulators and with industry working groups and trade associations to develop strategies for transitioning away from LIBOR. The Company is currently in the process of transitioning from LIBOR and plans to move to the Secured Overnight Financing Rate ("SOFR") and no longer offers LIBOR as an option to customers. ~~This standard is~~The Company has determined that the LIBOR transition and this guidance will not ~~expected to~~ have a material ~~impact~~effect on the Company's business operations and consolidated financial statements.

Note 9. Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

Management analyzes the Company's exposure to credit losses for both on-balance sheet and off-balance sheet activity using a consistent methodology for the quantitative framework as well as the qualitative framework. For purposes of estimating the allowance for credit losses for off-balance sheet credit exposures, the exposure atthat may default includes an estimated drawdown of unused credit based on historical credit utilization factors and current loss ~~factors, resulting in a proportionate amount of expected credit losses.~~factors.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company recorded a ~~$1.6 million~~$647,000 negative provision and a ~~$1.8 million negative~~$92,000 provision for credit losses for off-balance sheet credit exposures, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company recorded a ~~$980,000~~$973,000 and ~~$2.2~~a $3.4 million negative provision for credit losses for off-balance sheet credit exposures, respectively. The ~~$595,000~~$326,000 increase in the provision for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period in ~~2021,~~2022, was primarily the result of the period-over-period relative change in ~~projected loss factors.~~line of credit utilization. The ~~$3.9~~$3.5 million ~~decrease~~increase in the provision for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, was ~~mainly due to a decrease in~~primarily the ~~pipeline~~result of ~~loans approved and awaiting closing and an increase~~the period-over-period relative change in line of credit utilization ~~partially offset by~~and an increase in projected loss ~~factors.~~factors as a result of a worsened economic forecast.

The allowance for credit losses for off-balance sheet credit exposures was ~~$4.7 million and $6.5~~$3.2 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021, respectively,~~2022, and are included in other liabilities on the Consolidated Statements of Financial Condition.

Note 10. Fair Value Measurements

The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. Where quoted market values in an active market are not readily available, management utilizes various valuation techniques to estimate fair value.

Fair value is an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. However, in many instances fair value estimates may not be substantiated by comparison to independent markets and may not be realized in an immediate sale of the financial instrument.

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:


Level 1:						Unadjusted quoted market prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2:						Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3:						Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The valuation techniques are based upon the unpaid principal balance only, and exclude any accrued interest or dividends at the measurement date. Interest income and expense and dividend income are recorded within the consolidated statements of income depending on the nature of the instrument using the effective interest method based on acquired discount or premium.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The valuation techniques described below were used to measure fair value of financial instruments in the table below on a recurring basis as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Available for Sale Debt Securities, at Fair Value

For available for sale debt securities, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third-party data service providers or dealer market participants with whom the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to benchmark to comparable securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. As management is responsible for the determination of fair value, it performs quarterly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, management compares the prices received from the pricing service to a secondary pricing source. Additionally, management compares changes in the reported market values and returns to relevant market indices to test the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has generally not resulted in an adjustment in the prices obtained from the pricing service.

Equity Securities, at Fair Value

The Company holds equity securities that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs.

Derivatives

The Company records all derivatives on the statements of financial condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. The Company has interest rate derivatives resulting from a service provided to certain qualified borrowers in a loan related transaction which, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. As such, all changes in fair value of the Company’s derivatives are recognized directly in earnings.

The Company also uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges, and which satisfy hedge accounting requirements, involve the receipt of variable amounts from a

counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. These derivatives were used to hedge the variable cash outflows associated with FHLBNY borrowings and brokered demand deposits. The change in the fair value of these derivatives is recorded in accumulated other

comprehensive income (loss) ~~income,~~, and is subsequently reclassified into earnings in the period that the forecasted transactions affect earnings.

The fair value of the Company's derivatives is determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.

Assets Measured at Fair Value on a Non-Recurring Basis

The valuation techniques described below were used to estimate fair value of financial instruments measured on a non-recurring basis as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

Collateral-Dependent Impaired Loans

For loans measured for impairment based on the fair value of the underlying collateral, fair value was estimated using a market approach. The Company measures the fair value of collateral underlying impaired loans primarily through obtaining independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments, on an individual case-by-case basis, to comparable assets based on the appraisers’ market knowledge and experience, as well as adjustments for estimated costs to sell between 5% and 10%. Management classifies these loans as Level 3 within the fair value hierarchy.

Foreclosed Assets

Assets acquired through foreclosure or deed in lieu of foreclosure are carried at fair value, less estimated selling costs, which range between 5% and 10%. Fair value is generally based on independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments, on an individual case basis, to comparable assets based on the appraisers’ market knowledge and experience, and are classified as Level 3. When an asset is acquired, the excess of the loan balance over fair value less estimated selling costs is charged to the allowance for credit losses. A reserve for foreclosed assets may be established to provide for possible write-downs and selling costs that occur subsequent to foreclosure. Foreclosed assets are carried net of the related reserve. Operating results from real estate owned, including rental income, operating expenses, and gains and losses realized from the sales of real estate owned, are recorded as incurred.

There were no changes to the valuation techniques for fair value measurements as of ~~September~~June 30, ~~2022~~2023 or December 31, ~~2021.~~2022.

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The following tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair values as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, by level within the fair value hierarchy (in thousands):


		Fair Value Measurements at Reporting Date Using:						Fair Value Measurements at Reporting Date Using:
		September 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)		June 30, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Measured on a recurring basis:	Measured on a recurring basis:						Measured on a recurring basis:
Available for sale debt securities:	Available for sale debt securities:						Available for sale debt securities:
U.S. Treasury obligations	U.S. Treasury obligations	$	243,389	243,389	—	—	U.S. Treasury obligations	$	247,067	247,067	—	—

Agency obligations							Agency obligations	31,753		31,753	—	—
Mortgage-backed securities	Mortgage-backed securities	1,453,308		—	1,453,308	—	Mortgage-backed securities	1,346,724		—	1,346,724	—
Asset-backed securities	Asset-backed securities	39,744		—	39,744	—	Asset-backed securities	34,506		—	34,506	—
State and municipal obligations	State and municipal obligations	55,394		—	55,394	—	State and municipal obligations	55,725		—	55,725	—
Corporate obligations	Corporate obligations	37,474		—	37,474	—	Corporate obligations	34,114		—	34,114	—
Total available for sale debt securities	Total available for sale debt securities	1,829,309		243,389	1,585,920	—	Total available for sale debt securities	1,749,889		278,820	1,471,069	—
Equity securities	Equity securities	1,059		1,059	—	—	Equity securities	1,238		1,238	—	—
Derivative assets	Derivative assets	158,319		—	158,319	—	Derivative assets	131,191		—	131,191	—
		$	1,988,687	244,448	1,744,239	—		$	1,882,318	280,058	1,602,260	—

Derivative liabilities	Derivative liabilities	$	128,987	—	128,987	—	Derivative liabilities	$	108,067	—	108,067	—

Measured on a non-recurring basis:	Measured on a non-recurring basis:						Measured on a non-recurring basis:
Loans measured for impairment based on the fair value of the underlying collateral	Loans measured for impairment based on the fair value of the underlying collateral	$	29,300	—	—	29,300	Loans measured for impairment based on the fair value of the underlying collateral	$	14,582	—	—	14,582
Foreclosed assets	Foreclosed assets	2,053		—	—	2,053	Foreclosed assets	13,697		—	—	13,697
		$	31,353	—	—	31,353		$	28,279	—	—	28,279


		Fair Value Measurements at Reporting Date Using:						Fair Value Measurements at Reporting Date Using:
		December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)		December 31, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Measured on a recurring basis:	Measured on a recurring basis:						Measured on a recurring basis:
Available for sale debt securities:	Available for sale debt securities:						Available for sale debt securities:
U.S. Treasury obligations	U.S. Treasury obligations	$	196,329	196,329	—	—	U.S. Treasury obligations	$	245,816	245,816	—	—

Mortgage-backed securities	Mortgage-backed securities	1,708,831		—	1,708,831	—	Mortgage-backed securities	1,427,139		—	1,427,139	—
Asset-backed securities	Asset-backed securities	46,797		—	46,797	—	Asset-backed securities	37,621		—	37,621	—
State and municipal obligations	State and municipal obligations	69,707		—	69,707	—	State and municipal obligations	56,864		—	56,864	—
Corporate obligations	Corporate obligations	36,187		—	36,187	—	Corporate obligations	36,108		—	36,108	—
Total available for sale debt securities	Total available for sale debt securities	2,057,851		196,329	1,861,522	—	Total available for sale debt securities	1,803,548		245,816	1,557,732	—
Equity Securities	Equity Securities	1,325		1,325	—	—	Equity Securities	1,147		1,147	—	—
Derivative assets	Derivative assets	65,903		—	65,903	—	Derivative assets	148,151		—	148,151	—
		$	2,125,079	197,654	1,927,425	—		$	1,952,846	246,963	1,705,883	—

Derivative liabilities	Derivative liabilities	$	61,412	—	61,412	—	Derivative liabilities	$	120,896	—	120,896	—

Measured on a non-recurring basis:	Measured on a non-recurring basis:						Measured on a non-recurring basis:
Loans measured for impairment based on the fair value of the underlying collateral	Loans measured for impairment based on the fair value of the underlying collateral	$	18,237	—	—	18,237	Loans measured for impairment based on the fair value of the underlying collateral	$	23,988	—	—	23,988
Foreclosed assets	Foreclosed assets	8,731		—	—	8,731	Foreclosed assets	2,124		—	—	2,124
		$	26,968	—	—	26,968		$	26,112	—	—	26,112

There were no transfers between Level 1, Level 2 and Level 3 during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

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Other Fair Value Disclosures

The Company is required to disclose estimated fair value of financial instruments, both assets and liabilities on- and off- the balance sheet, for which it is practicable to estimate fair value. The following is a description of valuation methodologies used for those assets and liabilities.

Cash and Cash Equivalents

For cash and due from banks, federal funds sold and short-term investments, the carrying amount approximates fair value. ~~Included~~At June 30, 2023 and December 31, 2022, $70,000 was included in cash and cash equivalents, ~~at September 30, 2022 and December 31, 2021 was $1.8 million and $27.3 million, respectively,~~ representing cash collateral pledged to secure loan level swaps, risk participation agreements and reserves required by banking regulations.

Held to Maturity Debt Securities

For held to maturity debt securities, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third party data service providers or dealer market participants with whom the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to benchmark to comparable securities. Management evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. As management is responsible for the determination of fair value, it performs quarterly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, management compares the prices received from the pricing service to a secondary pricing source. Additionally, management compares changes in the reported market values and returns to relevant market indices to test the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has generally not resulted in adjustment in the prices obtained from the pricing service. The Company also holds debt instruments issued by the U.S. government and U.S. government agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 within the fair value hierarchy.

Federal Home Loan Bank of New York ("FHLBNY") Stock

The carrying value of FHLBNY stock is its cost. The fair value of FHLBNY stock is based on redemption at par value. The Company classifies the estimated fair value as Level 1 within the fair value hierarchy.

Loans

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial mortgage, residential mortgage, commercial, construction and consumer. Each loan category is further segmented into fixed and ~~adjustable rate~~adjustable-rate interest terms and into performing and non-performing categories. The fair value of performing loans was estimated using a combination of techniques, including a discounted cash flow model that utilizes a discount rate that reflects the Company’s current pricing for loans with similar characteristics and remaining maturity, adjusted by an amount for estimated credit losses inherent in the portfolio at the balance sheet date (i.e. exit pricing). The rates take into account the expected yield curve, as well as an adjustment for prepayment risk, when applicable. The Company classifies the estimated fair value of its loan portfolio as Level 3.

The fair value for significant non-performing loans was based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows. The Company classifies the estimated fair value of its non-performing loan portfolio as Level 3.

Deposits

The fair value of deposits with no stated maturity, such as non-interest bearing demand deposits and savings deposits, was equal to the amount payable on demand and classified as Level 1. The estimated fair value of certificates of deposit was based on the discounted value of contractual cash flows. The discount rate was estimated using the Company’s current rates offered for deposits with similar remaining maturities. The Company classifies the estimated fair value of its certificates of deposit portfolio as Level 2.

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Borrowed Funds

The fair value of borrowed funds was estimated by discounting future cash flows using rates available for debt with similar terms and maturities and is classified by the Company as Level 2 within the fair value hierarchy.

Commitments to Extend Credit and Letters of Credit

The fair value of commitments to extend credit and letters of credit was estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The Company classifies these commitments as Level 3 within the fair value hierarchy.

Limitations

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

Significant assets and liabilities that are not considered financial assets or liabilities include goodwill and other intangibles, deferred tax assets and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

The following tables present the Company’s financial instruments at their carrying and fair values as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022. Fair values are presented by level within the fair value hierarchy.


			Fair Value Measurements at June 30, 2023 Using:
(Dollars in thousands)	Carrying value		Fair value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents	$	208,872	208,872	208,872	—	—
Available for sale debt securities:
U.S. Treasury obligations	247,067		247,067	247,067	—	—
Agency obligations	31,753		31,753	31,753	—	—
Mortgage-backed securities	1,346,724		1,346,724	—	1,346,724	—
Asset-backed securities	34,506		34,506	—	34,506	—
State and municipal obligations	55,725		55,725	—	55,725	—
Corporate obligations	34,114		34,114	—	34,114	—
Total available for sale debt securities	$	1,749,889	1,749,889	278,820	1,471,069	—
Held to maturity debt securities, net of allowance for credit losses:
Agency obligations	12,096		11,167	11,167	—	—

State and municipal obligations	356,987		344,661	—	344,661	—
Corporate obligations	9,811		9,201	—	9,201	—
Total held to maturity debt securities, net of allowance for credit losses	$	378,894	365,029	11,167	353,862	—
FHLBNY stock	93,330		93,330	93,330	—	—
Equity Securities	1,238		1,238	1,238	—	—
Loans, net of allowance for credit losses	10,428,458		9,969,672	—	—	9,969,672
Derivative assets	131,191		131,191	—	131,191	—

Financial liabilities:
Deposits other than certificates of deposits	$	9,240,791	9,240,791	9,240,791	—	—
Certificates of deposit	1,020,329		1,015,211	—	1,015,211	—
Total deposits	$	10,261,120	10,256,002	9,240,791	1,015,211	—
Borrowings	1,849,714		1,832,814	—	1,832,814	—
Subordinated debentures	10,596		9,118	—	9,118	—
Derivative liabilities	108,067		108,067	—	108,067	—

Fair Value Measurements at September 30, 2022 Using:
(Dollars in thousands) Carrying value Fair value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents $ 184,868 184,868 184,868 — —
Available for sale debt securities:
U.S. Treasury obligations 243,389 243,389 243,389 — —
Mortgage-backed securities 1,453,308 1,453,308 — 1,453,308 —
Asset-backed securities 39,744 39,744 — 39,744 —
State and municipal obligations 55,394 55,394 — 55,394 —
Corporate obligations 37,474 37,474 — 37,474 —
Total available for sale debt securities $ 1,829,309 1,829,309 243,389 1,585,920 —
Held to maturity debt securities, net of allowance for credit losses:
Agency obligations 9,997 8,905 8,905 — —
Mortgage-backed securities 2 2 — 2 —
State and municipal obligations 372,259 349,732 — 349,732 —
Corporate obligations 10,811 10,029 — 10,029 —
Total held to maturity debt securities, net of allowance for credit losses $ 393,069 368,668 8,905 359,763 —
FHLBNY stock 55,717 55,717 55,717 — —
Equity Securities 1,059 1,059 1,059 — —
Loans, net of allowance for credit losses 9,957,896 9,542,609 — — 9,542,609
Derivative assets 158,319 158,319 — 158,319 —
Financial liabilities:
Deposits other than certificates of deposits $ 10,005,496 10,005,496 10,005,496 — —
Certificates of deposit 680,109 674,933 — 674,933 —
Total deposits $ 10,685,605 10,680,429 10,005,496 674,933 —
Borrowings 1,063,602 1,041,426 — 1,041,426 —
Subordinated debentures 10,442 9,688 — 9,688 —
Derivative liabilities 128,987 128,987 — 128,987 —


				Fair Value Measurements at December 31, 2021 Using:							Fair Value Measurements at December 31, 2022 Using:
(Dollars in thousands)	(Dollars in thousands)	Carrying value		Fair value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	(Dollars in thousands)	Carrying value		Fair value	Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Financial assets:	Financial assets:							Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	712,463	712,463	712,463	—	—	Cash and cash equivalents	$	186,508	186,508	186,508	—	—
Available for sale debt securities:	Available for sale debt securities:							Available for sale debt securities:
U.S. Treasury obligations	U.S. Treasury obligations	196,329		196,329	196,329	—	—	U.S. Treasury obligations	245,816		245,816	245,816	—	—
Agency obligations		—		—	—	—	—

Mortgage-backed securities	Mortgage-backed securities	1,708,831		1,708,831	—	1,708,831	—	Mortgage-backed securities	1,427,139		1,427,139	—	1,427,139	—
Asset-backed securities	Asset-backed securities	46,797		46,797	—	46,797	—	Asset-backed securities	37,621		37,621	—	37,621	—
State and municipal obligations	State and municipal obligations	69,707		69,707	—	69,707	—	State and municipal obligations	56,864		56,864	—	56,864	—
Corporate obligations	Corporate obligations	36,187		36,187	—	36,187	—	Corporate obligations	36,108		36,108	—	36,108	—
Total available for sale debt securities	Total available for sale debt securities	$	2,057,851	2,057,851	196,329	1,861,522	—	Total available for sale debt securities	$	1,803,548	1,803,548	245,816	1,557,732	—
Held to maturity debt securities:	Held to maturity debt securities:							Held to maturity debt securities:

Agency obligations	Agency obligations	$	9,996	9,821	9,821	—	—	Agency obligations	$	9,997	8,964	8,964	—	—
Mortgage-backed securities		21		21	—	21	—

State and municipal obligations	State and municipal obligations	415,699		429,552	—	429,552	—	State and municipal obligations	366,146		353,417	—	353,417	—
Corporate obligations	Corporate obligations	10,434		10,315	—	10,315	—	Corporate obligations	11,780		11,087	—	11,087	—
Total held to maturity debt securities	Total held to maturity debt securities	$	436,150	449,709	9,821	439,888	—	Total held to maturity debt securities	$	387,923	373,468	8,964	364,504	—
FHLBNY stock	FHLBNY stock	34,290		34,290	34,290	—	—	FHLBNY stock	68,554		68,554	68,554	—	—
Equity Securities	Equity Securities	1,325		1,325	1,325	—	—	Equity Securities	1,147		1,147	1,147	—	—
Loans, net of allowance for credit losses	Loans, net of allowance for credit losses	9,500,884		9,607,225	—	—	9,607,225	Loans, net of allowance for credit losses	10,160,860		9,768,460	—	—	9,768,460
Derivative assets	Derivative assets	65,903		65,903	—	65,903	—	Derivative assets	148,151		148,151	—	148,151	—

Financial liabilities:	Financial liabilities:							Financial liabilities:
Deposits other than certificates of deposits	Deposits other than certificates of deposits	$	10,541,497	10,541,497	10,541,497	—	—	Deposits other than certificates of deposits	$	9,811,588	9,811,588	9,811,588	—	—
Certificates of deposit	Certificates of deposit	692,515		694,041	—	694,041	—	Certificates of deposit	751,436		745,155	—	745,155	—
Total deposits	Total deposits	$	11,234,012	11,235,538	10,541,497	694,041	—	Total deposits	$	10,563,024	10,556,743	9,811,588	745,155	—
Borrowings	Borrowings	626,774		625,636	—	625,636	—	Borrowings	1,337,370		1,324,578	—	1,324,578	—
Subordinated debentures	Subordinated debentures	10,283		9,750	—	9,750	—	Subordinated debentures	10,493		9,422	—	9,422	—
Derivative liabilities	Derivative liabilities	61,412		61,412	—	61,412	—	Derivative liabilities	120,896		120,896	—	120,896	—

3433

Note 11. Other Comprehensive (Loss) Income

The following table presents the components of other comprehensive (loss) income, both gross and net of tax, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three months ended September 30,								Three months ended June 30,
		2022				2021				2023				2022
		Before Tax		Tax Effect	After Tax	Before Tax	Tax Effect	After Tax		Before Tax		Tax Effect	After Tax	Before Tax	Tax Effect	After Tax
Components of Other Comprehensive Income:	Components of Other Comprehensive Income:								Components of Other Comprehensive Income:
Unrealized gains and losses on available for sale debt securities:	Unrealized gains and losses on available for sale debt securities:								Unrealized gains and losses on available for sale debt securities:
Net unrealized (losses) gains arising during the period	Net unrealized (losses) gains arising during the period	$	(91,930)	24,637	(67,293)	(10,765)	2,775	(7,990)	Net unrealized (losses) gains arising during the period	$	(20,178)	5,452	(14,726)	(62,477)	16,744	(45,733)
Reclassification adjustment for gains included in net income	Reclassification adjustment for gains included in net income	—		—	—	—	—	—	Reclassification adjustment for gains included in net income	—		—	—	(58)	16	(42)
Total	Total	(91,930)		24,637	(67,293)	(10,765)	2,775	(7,990)	Total	(20,178)		5,452	(14,726)	(62,535)	16,760	(45,775)
Unrealized gains (losses) on derivatives (cash flow hedges)		6,614		(1,773)	4,841	2,382	(614)	1,768
Unrealized gains and losses on derivatives (cash flow hedges):									Unrealized gains and losses on derivatives (cash flow hedges):
Net unrealized gains (losses) arising during the period									Net unrealized gains (losses) arising during the period	5,002		(1,352)	3,650	3,110	(834)	2,276
Reclassification adjustment for gains included in net income									Reclassification adjustment for gains included in net income	(4,124)		1,114	(3,010)	(162)	44	(118)
Total									Total	878		(238)	640	2,948	(790)	2,158
Amortization related to post-retirement obligations	Amortization related to post-retirement obligations	(326)		90	(236)	(138)	35	(103)	Amortization related to post-retirement obligations	(358)		97	(261)	(322)	86	(236)
Total other comprehensive loss		$	(85,642)	22,954	(62,688)	(8,521)	2,196	(6,325)
Total other comprehensive (loss) income									Total other comprehensive (loss) income	$	(19,658)	5,311	(14,347)	(59,909)	16,056	(43,853)


		Nine months ended September 30,								Six months ended June 30,
		2022				2021				2023				2022
		Before Tax		Tax Effect	After Tax	Before Tax	Tax Effect	After Tax		Before Tax		Tax Effect	After Tax	Before Tax	Tax Effect	After Tax
Components of Other Comprehensive Income:	Components of Other Comprehensive Income:								Components of Other Comprehensive Income:
Unrealized gains and losses on available for sale debt securities:	Unrealized gains and losses on available for sale debt securities:								Unrealized gains and losses on available for sale debt securities:
Net unrealized (losses) arising during the period		$	(270,488)	72,491	(197,997)	(19,630)	5,061	(14,569)
Net unrealized gains (losses) arising during the period									Net unrealized gains (losses) arising during the period	$	7,641	(1,503)	6,138	(178,558)	47,854	(130,704)
Reclassification adjustment for gains included in net income	Reclassification adjustment for gains included in net income	(58)		16	(42)	(230)	59	(171)	Reclassification adjustment for gains included in net income	—		—	—	(58)	16	(42)
Total	Total	(270,546)		72,507	(198,039)	(19,860)	5,120	(14,740)	Total	7,641		(1,503)	6,138	(178,616)	47,870	(130,746)
Unrealized gains (losses) on derivatives (cash flow hedges)		23,821		(6,384)	17,437	6,959	(1,794)	5,165
Unrealized gains and losses on derivatives (cash flow hedges):									Unrealized gains and losses on derivatives (cash flow hedges):
Net unrealized gains (losses) arising during the period									Net unrealized gains (losses) arising during the period	4,219		(1,186)	3,033	16,703	(4,476)	12,227
Reclassification adjustment for (gains) losses included in net income									Reclassification adjustment for (gains) losses included in net income	(8,343)		2,254	(6,089)	504	(135)	369
Total									Total	(4,124)		1,068	(3,056)	17,207	(4,611)	12,596
Amortization related to post-retirement obligations	Amortization related to post-retirement obligations	(978)		230	(748)	(435)	112	(323)	Amortization related to post-retirement obligations	(727)		197	(530)	(700)	188	(512)
Total other comprehensive loss		$	(247,703)	66,353	(181,350)	(13,336)	3,438	(9,898)
Total other comprehensive income (loss)									Total other comprehensive income (loss)	$	2,790	(238)	2,552	(162,109)	43,447	(118,662)

3534

The following tables present the changes in the components of accumulated other comprehensive ~~income,~~(loss), net of tax, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):
Changes in Accumulated Other Comprehensive (Loss) Income by Component, net of tax
for the three months ended September 30,
2022 2021
Unrealized
Losses on
Available for Sale Debt Securities Post- Retirement
Obligations Unrealized Gains on Derivatives (cash flow hedges) Accumulated
Other
Comprehensive
Loss Unrealized Gains on
Available for Sale Debt Securities Post- Retirement
Obligations Unrealized Losses on Derivatives (cash flow hedges) Accumulated
Other
Comprehensive Income
Balance at
June 30, $ (130,957) 2,469 16,689 (111,799) 16,940 (1,301) (1,557) 14,082
Current - period other comprehensive (loss) income (67,293) (236) 4,841 (62,688) (7,990) (103) 1,768 (6,325)
Balance at September 30, $ (198,250) 2,233 21,530 (174,487) 8,950 (1,404) 211 7,757


	Changes in Accumulated Other Comprehensive (Loss) by Component, net of tax for the three months ended June 30,
	2023					2022
	Unrealized Losses on Available for Sale Debt Securities		Post- Retirement Obligations	Unrealized Gains on Derivatives (cash flow hedges)	Accumulated Other Comprehensive Loss	Unrealized Gains on Available for Sale Debt Securities	Post- Retirement Obligations	Unrealized Losses on Derivatives (cash flow hedges)	Accumulated Other Comprehensive Loss
Balance at March 31,	$	(165,750)	1,303	16,301	(148,146)	(85,182)	2,705	14,531	(67,946)
Current - period other comprehensive (loss)	(14,726)		(261)	640	(14,347)	(45,775)	(236)	2,158	(43,853)
Balance at June 30,	$	(180,476)	1,042	16,941	(162,493)	(130,957)	2,469	16,689	(111,799)

Changes in Accumulated Other Comprehensive Income (Loss) by Component, net of tax
for the nine months ended September 30,
2022 2021
Unrealized
Losses on
Available for Sale Debt Securities Post- Retirement
Obligations Unrealized Gains on Derivatives (cash flow hedges) Accumulated
Other
Comprehensive
Income (Loss) Unrealized Gains (Losses) on
Available for Sale Debt Securities Post- Retirement
Obligations Unrealized Gains (Losses) on Derivatives (cash flow hedges) Accumulated
Other
Comprehensive Income
Balance at December 31, $ (211) 2,981 4,093 6,863 23,690 (1,081) (4,954) 17,655
Current - period other comprehensive (loss) income (198,039) (748) 17,437 (181,350) (14,740) (323) 5,165 (9,898)
Balance at September 30, $ (198,250) 2,233 21,530 (174,487) 8,950 (1,404) 211 7,757


	Changes in Accumulated Other Comprehensive (Loss) by Component, net of tax for the six months ended June 30,
	2023					2022
	Unrealized Losses on Available for Sale Debt Securities		Post- Retirement Obligations	Unrealized Gains on Derivatives (cash flow hedges)	Accumulated Other Comprehensive Income (Loss)	Unrealized Gains (Losses) on Available for Sale Debt Securities	Post- Retirement Obligations	Unrealized Gains (Losses) on Derivatives (cash flow hedges)	Accumulated Other Comprehensive Income (Loss)
Balance at December 31,	$	(186,614)	1,572	19,997	(165,045)	(211)	2,981	4,093	6,863
Current - period other comprehensive income (loss)	6,138		(530)	(3,056)	2,552	(130,746)	(512)	12,596	(118,662)

Balance at June 30,	$	(180,476)	1,042	16,941	(162,493)	(130,957)	2,469	16,689	(111,799)

3635

The following tables summarize the reclassifications from accumulated other comprehensive ~~income~~ (loss) to the consolidated statements of income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Reclassifications From Accumulated Other Comprehensive Income ("AOCI")						Reclassifications From Accumulated Other Comprehensive Income ("AOCI")
		Amount reclassified from AOCI for the three months ended September 30,			Affected line item in the Consolidated Statement of Income			Amount reclassified from AOCI for the three months ended June 30,			Affected line item in the Consolidated Statement of Income
		2022		2021				2023		2022
Details of AOCI:	Details of AOCI:						Details of AOCI:

Available for sale debt securities:							Available for sale debt securities:
Realized net gains on the sale of securities available for sale							Realized net gains on the sale of securities available for sale	$	—	(58)	Net gain on securities transactions
						—		16		Income tax expense
						$	—	(42)		Net of tax

Cash flow hedges:	Cash flow hedges:						Cash flow hedges:
Unrealized (gains) losses on derivatives		(1,581)		1,030	Interest expense
Realized net gains on derivatives							Realized net gains on derivatives	$	(4,124)	(162)	Interest expense
		424		(265)	Income tax expense			1,114		44	Income tax expense
		(1,157)		765				$	(3,010)	(118)

Post-retirement obligations:	Post-retirement obligations:						Post-retirement obligations:
Amortization of actuarial gains	Amortization of actuarial gains	$	(326)	(149)	Compensation and employee benefits (1)		Amortization of actuarial gains	$	(356)	(326)	Compensation and employee benefits (1)
		90		38	Income tax expense			96		84	Income tax expense
Total reclassification	Total reclassification	$	(236)	(111)	Net of tax		Total reclassification	$	(260)	(242)	Net of tax

Total reclassifications	Total reclassifications	$	(1,393)	(111)	Net of tax		Total reclassifications	$	(3,270)	(402)	Net of tax


		Reclassifications From Accumulated Other Comprehensive Income ("AOCI")					Reclassifications From Accumulated Other Comprehensive Income ("AOCI")
		Amount reclassified from AOCI for the nine months ended September 30,			Affected line item in the Consolidated Statement of Income		Amount reclassified from AOCI for the six months ended June 30,			Affected line item in the Consolidated Statement of Income
		2022		2021			2023		2022
Details of AOCI:	Details of AOCI:					Details of AOCI:
Available for sale debt securities:	Available for sale debt securities:					Available for sale debt securities:
Realized net gains on the sale of securities available for sale	Realized net gains on the sale of securities available for sale	$	(58)	(230)	Net gain on securities transactions	Realized net gains on the sale of securities available for sale	$	—	(58)	Net gain on securities transactions
		16		59	Income tax expense		—		16	Income tax expense
		(42)		(171)	Net of tax		$	—	(42)	Net of tax

Cash flow hedges:	Cash flow hedges:					Cash flow hedges:
Unrealized losses on derivatives		(1,077)		2,856	Interest expense
Realized net (gains) losses on derivatives						Realized net (gains) losses on derivatives	$	(8,343)	504	Interest expense
		289		(736)	Income tax expense		2,254		(136)	Income tax expense
		(788)		2,120			$	(6,089)	368

Post-retirement obligations:	Post-retirement obligations:					Post-retirement obligations:
Amortization of actuarial gains	Amortization of actuarial gains	$	(978)	(449)	Compensation and employee benefits (1)	Amortization of actuarial gains	$	(712)	(652)	Compensation and employee benefits (1)
		230		119	Income tax expense		192		171	Income tax expense
Total reclassification	Total reclassification	$	(748)	(330)	Net of tax	Total reclassification	$	(520)	(481)	Net of tax

Total reclassifications	Total reclassifications	$	(1,578)	(501)	Net of tax	Total reclassifications	$	(6,609)	(155)	Net of tax

(1) This item is included in the computation of net periodic benefit cost. See Note 7. Components of Net Periodic Benefit Cost.

3736

Note 12. Derivative and Hedging Activities

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through the management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities.

Non-designated Hedges. Derivatives not designated in qualifying hedging relationships are not speculative and result from a service the Company provides to certain qualified commercial borrowers in loan related transactions which, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company may execute interest rate swaps with qualified commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. The interest rate swap agreement which the Company executes with the commercial borrower is collateralized by the borrower's commercial real estate financed by the Company. As the Company has not elected to apply hedge accounting and these interest rate swaps do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had ~~164~~152 loan related interest rate swaps with aggregate notional amounts of ~~$2.45~~$2.23 billion and ~~$2.38~~$2.40 billion, respectively.

The Company periodically enters into risk participation agreements ("RPAs"), with the Company functioning as either the lead institution, or as a participant when another company is the lead institution on a commercial loan. These RPAs are entered into to manage the credit exposure on interest rate contracts associated with these loan participation agreements. Under the RPAs, the Company will either receive or make a payment in the event the borrower defaults on the related interest rate contract. The Company has minimum collateral posting thresholds with certain of its risk participation counterparties, and has posted collateral of $70,000 against the potential risk of default by the borrower under these agreements. For ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had 12 and 1314 credit derivatives, respectively, with aggregate notional amounts of ~~$131.0~~$143.5 million and ~~$144.8~~$157.9 million, respectively, from participations in interest rate swaps as part of these loan participation arrangements. At ~~September~~June 30, ~~2022,~~2023, the asset and liability positions of these fair value credit derivatives totaled ~~$29,000~~$47,000 and ~~$12,000,~~$11,000, respectively, compared to ~~$109,000~~$26,000 and ~~$46,000,~~$12,000, respectively, at December 31, ~~2021.~~2022.

Cash Flow Hedges of Interest Rate Risk. The Company’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable payment amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Changes in the fair value of derivatives designated and that qualify as cash flow hedges of interest rate risk are recorded in accumulated other comprehensive (loss) income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, such derivatives were used to hedge the variable cash outflows associated with FHLBNY borrowings and brokered demand deposits.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s borrowings or demand deposits. During the next twelve months, the Company estimates that ~~$14.2~~$15.7 million will be reclassified as a reduction to interest expense. At ~~September~~June 30, ~~2022,~~2023, the Company had 11nine outstanding interest rate derivatives with an aggregate notional amount of ~~$460.0~~$405.0 million that were each designated as a cash flow hedge of interest rate risk.

Assets and liabilities relating to certain financial instruments, including derivatives, may be eligible for offset in the Consolidated Statements of Financial Condition and/or subject to enforceable master netting arrangements or similar agreements. The Company does not offset asset and liabilities under such arrangements in the Consolidated Statements of Financial Condition.

The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are eligible for offset in the Consolidated Statements of Condition at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands).


	Fair Values of Derivative Instruments as of June 30, 2023
	Asset Derivatives					Liability Derivatives
	Notional Amount		Consolidated Statements of Financial Condition	Fair value (2)		Notional Amount	Consolidated Statements of Financial Condition	Fair value (2)
Derivatives not designated as a hedging instrument:
Interest rate products	$	1,114,765	Other assets	$	109,589	1,114,765	Other liabilities	109,871
Credit contracts	46,768		Other assets	47		96,764	Other liabilities	11
Total derivatives not designated as a hedging instrument				109,636				109,882

Derivatives designated as a hedging instrument:
Interest rate products	405,000		Other assets	24,769		—	Other liabilities	—

Total gross derivative amounts recognized on the balance sheet				134,405				109,882

Gross amounts offset on the balance sheet				—				—
Net derivative amounts presented on the balance sheet				$	134,405			109,882

Gross amounts not offset on the balance sheet:
Financial instruments - institutional counterparties				$	—			—
Cash collateral - institutional counterparties (1)				129,021				—
Net derivatives not offset				$	5,384			109,882

Fair Values of Derivative Instruments as of September 30, 2022
Asset Derivatives Liability Derivatives
Notional Amount Consolidated Statements of Financial Condition
Fair
value (2)
Notional Amount Consolidated Statements of Financial Condition
Fair
value (2)
Derivatives not designated as a hedging instrument:
Interest rate products $ 1,226,285 Other assets $ 129,205 $ 1,226,285 Other liabilities $ 129,556
Credit contracts 47,260 Other assets 29 83,772 Other liabilities 12
Total derivatives not designated as a hedging instrument 129,234 129,568
Derivatives designated as a hedging instrument:
Interest rate products 460,000 Other assets 30,528 — Other liabilities —
Total gross derivative amounts recognized on the balance sheet 159,762 129,568
Gross amounts offset on the balance sheet — —
Net derivative amounts presented on the balance sheet $ 159,762 $ 129,568
Gross amounts not offset on the balance sheet:
Financial instruments - institutional counterparties $ — $ —
Cash collateral - institutional counterparties (1)
155,553 —
Net derivatives not offset $ 4,209 $ 129,568


		Fair Values of Derivative Instruments as of December 31, 2021											Fair Values of Derivative Instruments as of December 31, 2022
		Asset Derivatives					Liability Derivatives						Asset Derivatives					Liability Derivatives
		Notional Amount		Consolidated Statements of Financial Condition	Fair value (2)		Notional Amount		Consolidated Statements of Financial Condition	Fair value (2)			Notional Amount		Consolidated Statements of Financial Condition	Fair value (2)		Notional Amount		Consolidated Statements of Financial Condition	Fair value (2)
Derivatives not designated as a hedging instrument:	Derivatives not designated as a hedging instrument:											Derivatives not designated as a hedging instrument:
Interest rate products	Interest rate products	$	1,188,703	Other assets	$	59,110	$	1,188,703	Other liabilities	$	60,163	Interest rate products	$	1,198,191	Other assets	$	122,047	$	1,198,191	Other liabilities	122,378
Credit contracts	Credit contracts	47,599		Other assets	109		97,213		Other liabilities	46		Credit contracts	47,143		Other assets	26		110,714		Other liabilities	12
Total derivatives not designated as a hedging instrument	Total derivatives not designated as a hedging instrument				59,219					60,209		Total derivatives not designated as a hedging instrument				122,073					122,390

Derivatives designated as a hedging instrument:	Derivatives designated as a hedging instrument:											Derivatives designated as a hedging instrument:
Interest rate products	Interest rate products	250,000		Other assets	7,278		350,000		Other liabilities	2,263		Interest rate products	460,000		Other assets	29,119		—		Other liabilities	—

Total gross derivative amounts recognized on the balance sheet	Total gross derivative amounts recognized on the balance sheet				66,497					62,472		Total gross derivative amounts recognized on the balance sheet				151,192					122,390

Gross amounts offset on the balance sheet	Gross amounts offset on the balance sheet				—					—		Gross amounts offset on the balance sheet				—					—
Net derivative amounts presented on the balance sheet	Net derivative amounts presented on the balance sheet				$	66,497				$	62,472	Net derivative amounts presented on the balance sheet				$	151,192				122,390

Gross amounts not offset on the balance sheet:	Gross amounts not offset on the balance sheet:											Gross amounts not offset on the balance sheet:
Financial instruments - institutional counterparties	Financial instruments - institutional counterparties				$	18,618				$	18,618	Financial instruments - institutional counterparties				$	—				—
Cash collateral - institutional counterparties (1)	Cash collateral - institutional counterparties (1)				—					26,566		Cash collateral - institutional counterparties (1)				149,800					—
Net derivatives not offset	Net derivatives not offset				$	47,879				$	17,288	Net derivatives not offset				$	1,392				122,390

(1) Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The application of the cash collateral cannot reduce the net derivative position below zero. Therefore, excess cash collateral, if any, is not reflected above.

(2) The fair values related to interest rate products in the above net derivative tables show the total value of assets and liabilities, which include accrued interest receivable and accrued interest payable for the periods ended ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands).


			Gain (loss) recognized in income on derivatives for the three months ended					Gain (loss) recognized in income on derivatives for the three months ended
		Consolidated Statements of Income	September 30, 2022		September 30, 2021		Consolidated Statements of Income	June 30, 2023		June 30, 2022
Derivatives not designated as a hedging instrument:	Derivatives not designated as a hedging instrument:					Derivatives not designated as a hedging instrument:
Interest rate products	Interest rate products	Other income	$	259	191	Interest rate products	Other income	$	126	77
Credit contracts	Credit contracts	Other income	(12)		(19)	Credit contracts	Other income	(8)		(18)
Total	Total		$	247	172	Total		$	118	59

Derivatives designated as a hedging instrument:	Derivatives designated as a hedging instrument:					Derivatives designated as a hedging instrument:
Interest rate products	Interest rate products	Interest (income) expense	$	(1,581)	1,030	Interest rate products	Interest (income) expense	$	(4,124)	(162)
Total	Total		$	(1,581)	1,030	Total		$	(4,124)	(162)

4039


			Gain (loss) recognized in income on derivatives for the nine months ended					Gain (loss) recognized in income on derivatives for the six months ended
		Consolidated Statements of Income	September 30, 2022		September 30, 2021		Consolidated Statements of Income	June 30, 2023		June 30, 2022
Derivatives not designated as a hedging instrument:	Derivatives not designated as a hedging instrument:					Derivatives not designated as a hedging instrument:
Interest rate products	Interest rate products	Other income	$	702	268	Interest rate products	Other income	$	52	443
Credit contracts	Credit contracts	Other income	(47)		28	Credit contracts	Other income	(4)		(35)
Total	Total		$	655	296	Total		$	48	408

Derivatives designated as a hedging instrument:	Derivatives designated as a hedging instrument:					Derivatives designated as a hedging instrument:
Interest rate products	Interest rate products	Interest (income) expense	$	(1,077)	2,856	Interest rate products	Interest (income) expense	$	(8,343)	504
Total	Total		$	(1,077)	2,856	Total		$	(8,343)	504

The Company has agreements with certain of its dealer counterparties which contain a provision that if the Company defaults on any of its indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be deemed in default on its derivative obligations. In addition, the Company has agreements with certain of its dealer counterparties which contain a provision that if the Company fails to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

At ~~September~~June 30, ~~2022,~~2023, the Company had four dealer counterparties. The Company had a net asset position with respect to all of its counterparties.

4140

Note 13. Revenue Recognition

The Company generates revenue from several business channels. The guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606) does not apply to revenue associated with financial instruments, including interest income on loans and investments, which comprise the majority of the Company's revenue. For both the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the out-of-scope revenue related to financial instruments was ~~81.1%~~88.5% and ~~82.6%~~87.6% of the Company's total revenue, compared to ~~81.0% and 82.0%~~83.5% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively. Revenue-generating activities that are within the scope of Topic 606, are components of non-interest income. These revenue streams are generally classified into three categories: wealth management revenue, insurance agency income and banking service charges and other fees.

The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):


		Three months ended September 30,			Nine months ended September 30,			Three months ended June 30,			Six months ended June 30,
		2022		2021	2022	2021		2023		2022	2023	2022
Non-interest income	Non-interest income						Non-interest income
In-scope of Topic 606:	In-scope of Topic 606:						In-scope of Topic 606:
Wealth management fees	Wealth management fees	$	6,785	7,921	21,274	22,914	Wealth management fees	$	6,919	7,024	13,834	14,489
Insurance agency income	Insurance agency income	2,865		2,433	9,135	8,009	Insurance agency income	3,847		2,850	7,950	6,270
Banking service charges and other fees:	Banking service charges and other fees:						Banking service charges and other fees:
Service charges on deposit accounts	Service charges on deposit accounts	3,288		2,910	9,321	7,965	Service charges on deposit accounts	3,050		3,068	6,413	6,031
Debit card and ATM fees	Debit card and ATM fees	756		913	2,372	4,789	Debit card and ATM fees	761		846	1,466	1,616
Total banking service charges and other fees	Total banking service charges and other fees	4,044		3,823	11,693	12,754	Total banking service charges and other fees	3,811		3,914	7,879	7,647
Total in-scope non-interest income	Total in-scope non-interest income	13,694		14,177	42,102	43,677	Total in-scope non-interest income	14,577		13,788	29,663	28,406
Total out-of-scope non-interest income	Total out-of-scope non-interest income	14,751		9,185	27,421	22,479	Total out-of-scope non-interest income	4,810		7,144	11,877	12,672
Total non-interest income	Total non-interest income	$	28,445	23,362	69,523	66,156	Total non-interest income	$	19,387	20,932	41,540	41,078

Wealth management fee income represents fees earned from customers as consideration for asset management, investment advisory and trust services. The Company’s performance obligation is generally satisfied monthly and the resulting fees are recognized monthly. The fee is generally based upon the average market value of the assets under management ("AUM") for the month and the applicable fee rate. The monthly accrual of wealth management fees is recorded in other assets on the Company's Consolidated Statements of Financial Condition. Fees are received from the customer on a monthly basis. The Company does not earn performance-based incentives. To a lesser extent, optional services such as tax return preparation and estate settlement are also available to existing customers. The Company’s performance obligation for these transaction-based services are generally satisfied, and related revenue recognized, at either a point in time when the service is completed, or in the case of estate settlement, over a relatively short period of time, as each service component is completed.

Insurance agency income, consisting of commissions and fees, is generally recognized as of the effective date of the insurance policy. Commission revenues related to installment billings are recognized on the invoice date. Subsequent commission adjustments are recognized upon the receipt of notification from insurance companies concerning matters necessitating such adjustments. Profit-sharing contingent commissions are recognized when determinable, which is generally when such commissions are received from insurance companies, or when the Company receives formal notification of the amount of such payments.

Service charges on deposit accounts include overdraft service fees, account analysis fees and other deposit related fees. These fees are generally transaction-based, or time-based services. The Company's performance obligation for these services are generally satisfied, and revenue recognized, at the time the transaction is completed, or the service rendered. Fees for these services are generally received from the customer either at the time of transaction, or monthly. Debit card and ATM fees are generally transaction-based. Debit card revenue is primarily comprised of interchange fees earned when a customer's Company card is processed through a card payment network. ATM fees are largely generated when a Company cardholder uses a non-Company ATM, or a non-Company cardholder uses a Company ATM. The Company's performance obligation for these services is satisfied when the service is rendered. Payment is generally received at the time of transaction or monthly.

Out-of-scope non-interest income primarily consists of Bank-owned life insurance and net fees on loan level interest rate swaps, along with gains and losses on the sale of loans and foreclosed real estate, loan prepayment fees and loan servicing fees. None of these revenue streams are subject to the requirements of Topic 606.

Note 14. Leases

The following table represents the consolidated statements of financial condition classification of the Company’s right-of use-assets and lease liabilities at ~~September~~June 30, ~~2022~~2023 and December 31, 2021 (in thousands):

Classification

September 30, 2022

December 31, 2021

Classification

June 30, 2023

December 31, 2022

Lease Right-of-Use Assets:

Operating lease right-of-use assets

Other assets

62,708

48,808

Operating lease right-of-use assets

Other assets

60,749

60,577

Lease Liabilities:

Operating lease liabilities

Other liabilities

65,300

50,236

Operating lease liabilities

Other liabilities

63,916

63,372

The calculated amount of the right-of-use assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right-of-use asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception based upon the term of the lease. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was applied.

All of the leases in which the Company is the lessee are classified as operating leases and are primarily comprised of real estate properties for branches and administrative offices with terms extending through 2040.

At ~~September~~June 30, ~~2022,~~2023, the weighted-average remaining lease term and the weighted-average discount rate for the Company's operating leases were ~~8.8~~8.3 years and ~~2.57%~~2.71%, respectively.

The following tables represent lease costs and other lease information for the Company's operating leases. The variable lease cost primarily represents variable payments such as common area maintenance and utilities (in thousands):


		Three months ended September 30, 2022		Three months ended September 30, 2021			Three months ended June 30, 2023		Three months ended June 30, 2022
Lease Costs	Lease Costs					Lease Costs
Operating lease cost	Operating lease cost	$	2,613	$	2,417	Operating lease cost	$	2,629	2,586

Variable lease cost	Variable lease cost	667		728		Variable lease cost	842		718

Total lease cost	Total lease cost	$	3,280	$	3,145	Total lease cost	$	3,471	3,304


		Nine months ended September 30, 2022		Nine months ended September 30, 2021			Six months ended June 30, 2023		Six months ended June 30, 2022
Lease Costs	Lease Costs					Lease Costs
Operating lease cost	Operating lease cost	$	8,006	$	7,559	Operating lease cost	$	5,257	5,393

Variable lease cost	Variable lease cost	2,103		2,247		Variable lease cost	1,722		1,436

Total lease cost	Total lease cost	$	10,109	$	9,806	Total lease cost	$	6,979	6,829


Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:	Nine months ended September 30, 2022		Nine months ended September 30, 2021		Cash paid for amounts included in the measurement of lease liabilities:	Six months ended June 30, 2023		Six months ended June 30, 2022

Operating cash flows from operating leases	Operating cash flows from operating leases	$	6,328	$	6,861	Operating cash flows from operating leases	$	4,776	4,060

4342

During the nine months ended September 30, 2022, the Company added one new lease obligation related to the Company's new administrative office location in Iselin, New Jersey. The Company recorded a right-of-use asset and lease liability of $16.0 million for this lease obligation.

Future minimum payments for operating leases with initial or remaining terms of one year or more as of ~~September~~June 30, ~~2022,~~2023, were as follows (in thousands):


		Operating leases			Operating leases
Twelve months ended:	Twelve months ended:			Twelve months ended:
Remainder of 2022	Remainder of 2022	$	2,337	Remainder of 2022	$	5,094
2023	2023	9,379		2023	9,971
2024	2024	9,347		2024	9,488
2025	2025	8,812		2025	8,518
2026	2026	7,620		2026	7,667
Thereafter	Thereafter	35,708		Thereafter	30,707
Total future minimum lease payments	Total future minimum lease payments	73,203		Total future minimum lease payments	71,445
Amounts representing interest	Amounts representing interest	7,903		Amounts representing interest	7,529
Present value of net future minimum lease payments	Present value of net future minimum lease payments	$	65,300	Present value of net future minimum lease payments	$	63,916


Item 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

Certain statements contained herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” "project," "intend," “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those set forth in Item 1A of the Company's Annual Report on Form 10-K, as supplemented by its Quarterly Reports on Form 10-Q, and those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, the effects of the recent turmoil in the banking industry (including the closing of three financial institutions), changes in accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets, the availability of and costs associated with sources of liquidity, the ability to complete, or any delays in completing, the pending merger between the Company and Lakeland; any failure to realize the anticipated benefits of the transaction when expected or at all; certain restrictions during the pendency of the transaction that may impact the Company’s ability to pursue certain business opportunities or strategic transactions; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management’s attention from ongoing business operations and opportunities; and potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger and integration of the companies.

In addition, the effects of the COVID-19 pandemic continue to have an uncertain impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, including potential variants, it is difficult to predict the continuing impact of the pandemic on the Company's business, financial condition or results of operations. The extent of such impact will depend on future developments, which remain highly uncertain, including when the pandemic will be controlled and abated, and the extent to which the economy can remain open.

The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date they are made. The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not assume any duty, and does not undertake, to update any forward-looking statements to reflect events or circumstances after the date of this statement.

Lakeland Bancorp, Inc. Merger Agreement

On September 26, 2022, the Company entered into a definitive merger agreement pursuant to which it will merge (the “merger”) with Lakeland Bancorp, Inc. ("Lakeland"), and Lakeland Bank, a wholly owned subsidiary of Lakeland, will merge with and into Provident Bank, a wholly owned subsidiary of the Company. The merger agreement has been unanimously approved by the boards of ~~directors of~~both companies and shareholder approval has also been received by both companies. The actual value of the Company’s common stock to be recorded as consideration in the merger will be based on the closing price of Company’s common stock at the time of the merger completion date. Under the merger agreement, each share of Lakeland common stock will be exchanged for 0.8319 shares of the Company's common stock plus cash in lieu of fractional shares. The merger is expected to close in the second quarter of 2023, subject to satisfaction of customary closing conditions, including receipt of required regulatory approvals and approval by the shareholders of both companies.

Critical Accounting Policies

The Company considers certain accounting policies to be critically important to the fair presentation of its financial condition and results of operations. These policies require management to make complex judgments on matters which by their nature have elements of uncertainty. The sensitivity of the Company’s consolidated financial statements to these critical accounting policies, and the assumptions and estimates applied, could have a significant impact on its financial condition and results of operations. These assumptions, estimates and judgments made by management can be influenced by a number of factors, including the general economic environment. The Company has identified the ~~following as critical accounting policies:~~

•~~Adequacy of the~~ allowance for credit ~~losses; and~~losses on loans as a critical accounting policy.

•~~Valuation of deferred tax assets~~

On January 1, 2020, the Company adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments,” which replaced the incurred loss methodology with the current expected credit loss (“CECL”) methodology. The allowance for credit losses is a valuation account that reflects management’s evaluation of the current expected credit losses in the loan portfolio. The Company maintains the allowance for credit losses through provisions for credit losses that are charged ~~or credited~~ to income. Charge-offs against the allowance for credit losses are taken on loans where management determines that the collection of loan principal and interest is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for credit losses.

The calculation of the allowance for credit losses is a critical accounting policy of the Company. Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience for both the Company and peers provides the basis for the estimation of expected credit losses, where observed credit losses are converted to probability of default rate (“PDR”) curves through the use of segment-specific loss given default (“LGD”) risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment, primarily due to the nature of the underlying collateral. These risk factors were assessed for reasonableness against the Company’s own loss experience and adjusted in certain cases when the relationship between the Company’s historical default and loss severity ~~deviates~~deviate from that of the wider industry. The historical PDR curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle.

Using the historical relationship between economic conditions and loan performance, management’s expectation of future loan performance is incorporated using an externally developed economic forecast. This forecast is applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model will revert to long-term average economic conditions using a straight-line, time-based methodology. The Company's current forecast period is six quarters, with a ~~four quarter~~four-quarter reversion period to historical average macroeconomic factors. The Company's economic forecast is approved by the Company's Asset-Liability Committee.

The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a quarterly basis, when similar risk characteristics exist. The respective quantitative allowance for each loan segment is measured using an econometric, discounted PDR/LGD modeling methodology in which distinct, segment-specific multi-variate regression models are applied to an external economic forecast. Under the discounted cash flows methodology, expected credit losses are estimated over the effective life of the loans by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for modeled cash flows, adjusted for modeled defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies at the reporting date: management has a reasonable expectation that a ~~troubled debt restructuring (“TDR”)~~modification will be executed with an individual borrower; or when an extension or renewal option is included in the original contract and is not

unconditionally cancellable by the Company. Management will assess the likelihood of anthe option being exercised by ~~any given~~the borrower and appropriately extend the maturity ~~of the portfolio~~ for modeling purposes.

The Company considers qualitative adjustments to credit loss estimates for information not already captured in the quantitative component of the loss estimation process. Qualitative factors are based on portfolio concentration levels, model imprecision, changes in industry conditions, changes in the Company’s loan review process, changes in the Company’s loan policies and procedures, and economic forecast uncertainty.

One of the most significant judgments involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period. As of June 30, 2023, the model incorporated Moody’s baseline economic forecast, as adjusted for qualitative factors, as well as an extensive review of classified loans and loans that were classified as impaired with a specific reserve assigned to those loans. This baseline outlook reflected a worsening economic forecast and related deterioration in the projected commercial property price index over the expected life of the loan portfolio and resulted in recorded provisions of $10.4 million and $16.4 million for the three and six months ended June 30, 2023, and a coverage ratio of 97 basis points. If the Company had used a more pessimistic commercial

real estate property price index over the expected life of the loan portfolio, the provision would have increased $6.5 million, with a coverage ratio of 103 basis points.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed segments for estimating loss based on type of borrower and collateral which is generally based upon federal call report segmentation. The segments have been combined or sub-segmented as needed to ensure loans of similar risk profiles are appropriately pooled. As of ~~September~~June 30, ~~2022,~~2023, the portfolio and class segments for the Company’s loan portfolio were:

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

•Commercial Loans – Commercial Owner Occupied and Commercial Non-Owner Occupied

•Consumer Loans – First Lien Home Equity and Other Consumer

The allowance for credit losses on loans individually evaluated for impairment is based upon loans that have been identified through the Company’s normal loan monitoring process. This process includes the review of delinquent and problem loans at the Company’s Delinquency, Credit, Credit Risk Management and Allowance Committees; or which may be identified through the Company’s loan review process. Generally, the Company only evaluates loans individually for impairment if the loan is non-accrual, non-homogeneous and the balance is at least $1.0 ~~million, or if the loan was modified as a TDR.~~million.

For all classes of loans deemed collateral-dependent, the Company estimates expected credit losses based on the fair value of the collateral less any selling costs. If the loan is not collateral dependent, the allowance for credit losses related to individually assessed loans is based on discounted expected cash flows using the loan’s initial effective interest rate.

A loan for which the terms have been modified resulting in a concession by the Company, and for which the borrower is experiencing financial difficulties is considered to be a TDR. The allowance for credit losses on a TDR is measured using the same method as all other impaired loans, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring.

For loans acquired that have experienced more-than-insignificant deterioration in credit quality since their origination are considered ~~Purchased Credit Deteriorated ("PCD")~~PCD loans. The Company evaluates acquired loans for deterioration in credit quality based on any of, but not limited to, the following: (1) non-accrual status; (2) ~~troubled debt restructured~~modification designation; (3) risk ratings of special mention, substandard or doubtful; (4) watchlist credits; and (5) delinquency status, including loans that are current on acquisition date, but had been previously delinquent. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. Subsequent to the acquisition date, the initial allowance for credit losses on PCD loans will increase or decrease based on future evaluations, with changes recognized in the provision for credit losses.

Management believes the primary risks inherent in the portfolio are a general decline in the economy, a decline in real estate market values, rising unemployment or a protracted period of elevated unemployment, increasing vacancy rates in commercial investment properties and possible increases in interest rates in the absence of economic improvement. As the impact of COVID-19 continues, the effectiveness of medical advances, government programs and the resulting impact on consumer behavior and employment conditions will have a material bearing on future credit conditions. Any one or a combination of these events may adversely affect borrowers’ ability to repay the loans, resulting in increased delinquencies, credit losses and higher levels of provisions. Management considers it important to maintain the ratio of the allowance for credit losses to total loans at an acceptable level given current and forecasted economic conditions, interest rates and the composition of the portfolio.

Although management believes that the Company has established and maintained the allowance for credit losses at appropriate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment and economic forecast. Management evaluates its estimates and assumptions on an ongoing basis giving consideration to forecasted economic factors, historical loss experience and other factors. Such estimates and assumptions are adjusted when facts and circumstances dictate. In addition to the ongoing impact of COVID-19, illiquid credit markets, volatile securities markets, and declines in the housing and commercial real estate markets and the economy in general may increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the

economic environment will be reflected in the financial statements in future periods. In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for credit losses as an integral part of their examination process. Such agencies may require the Company to recognize additions to the allowance or additional write-downs based on their judgments about information available to them at the time of their examination. Although management uses the best information available, the level of the allowance for credit losses remains an estimate that is subject to significant judgment and short-term change.

The CECL approach to calculate the allowance for credit losses on loans is significantly influenced by the composition, characteristics and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecast utilized.

Material changes to these and other relevant factors creates greater volatility to the allowance for credit losses, and therefore, greater volatility to the Company’s reported earnings. ~~Management considers different economic scenarios that may impact~~For the ~~allowance for credit losses on loans. Among other balance sheet~~three and ~~income statement changes, these scenarios could result in a significant increase to~~six months ended June 30, 2023, the allowance for credit losses on loans. These scenarios include both the quantitative and qualitative components of the model and demonstrate how sensitive the allowance can be to key assumptions underlying the overall calculation. To the extent actual losses are higher than management estimates, additional provision for credit losses on loans ~~could be required~~totaled $10.4 million and ~~could adversely affect our earnings or financial position in future periods. See Note 4~~$16.4 million, compared to ~~the Consolidated Financial Statements for more information on the allowance~~a $3.0 million provision for credit losses ~~on loans.~~and a $3.4 million negative provision for credit losses for the three and six months ended June 30, 2022. The increases in provision for

~~The determination~~

both periods was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices over the expected life of ~~whether deferred tax assets will be realizable is predicated on~~ the reversal of existing deferred tax liabilities and estimates of future taxable income. Such estimates are subject to management’s judgment. A valuation allowance is established when management is unable to conclude that it is more likely than not that it will realize deferred tax assets based on the nature and timing of these items. The Company did not require a valuation allowance at September 30, 2022 or December 31, 2021.loan portfolio within our CECL model, combined with an increase in total loans outstanding.

COMPARISON OF FINANCIAL CONDITION AT ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 AND DECEMBER 31, ~~2021~~2022

Total assets at ~~September~~June 30, ~~2022~~2023 were ~~$13.60~~$14.03 billion, a ~~$177.4~~$246.2 million ~~decrease~~increase from December 31, ~~2021.~~2022. The ~~decrease~~increase in total assets was primarily due to a ~~$527.6~~$281.6 million ~~decrease~~increase in ~~cash and cash equivalents and~~total loans, partially offset by a ~~$250.5~~$37.8 million decrease in total ~~investments, partially offset by a $464.9 million increase in total loans.~~investments.

The Company’s loan portfolio increased ~~$464.9~~$281.6 million to ~~$10.05~~$10.53 billion at ~~September~~June 30, ~~2022,~~2023, from ~~$9.58~~$10.25 billion at December 31, ~~2021.~~2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, loan funding, including advances on lines of credit, totaled ~~$3.05~~$1.79 billion, compared with ~~$2.54~~$2.15 billion for the same period in ~~2021. Total PPP loans outstanding, which are included in total commercial loans, decreased $89.3 million to $5.6 million at September 30, 2022, from $94.9 million at December 31, 2021. Excluding~~2022. During the ~~decrease in PPP loans, during the nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the ~~Company experienced~~loan portfolio had net increases of ~~$410.2~~$57.3 million in commercial mortgage loans, ~~$114.0~~$132.0 million in multi-family loans and ~~$91.0~~$114.8 million in commercial loans, partially offset by net decreases in residential mortgage, construction and consumer loans of ~~$33.3~~$11.5 million ~~$16.4~~$8.3 million and ~~$10.9~~$3.5 million, respectively. Commercial loans, consisting of commercial real estate, multi-family, commercial and construction loans, represented ~~85.2%~~86.1% of the loan portfolio at ~~September~~June 30, ~~2022,~~2023, compared to ~~84.1%~~85.6% at December 31, ~~2021.~~2022.

The Company participates in loans originated by other banks, including participations designated as Shared National Credits (“SNCs”). The Company’s gross commitments and outstanding balances as a participant in SNCs were ~~$191.6~~$186.0 million and ~~$105.6~~$87.0 million, respectively, at ~~September~~June 30, ~~2022,~~2023, compared to ~~$167.1~~$203.9 million and ~~$78.5~~$87.3 million, respectively, at December 31, ~~2021. No~~2022. One SNC ~~relationships were~~relationship, with an outstanding balance of $7.3 million was 90 days or more delinquent at ~~September~~June 30, ~~2022.~~2023.

The Company had outstanding junior lien mortgages totaling ~~$138.7~~$135.2 million at ~~September~~June 30, ~~2022.~~2023. Of this total, three loans totaling ~~$124,200~~$237,900 were 90 days or more delinquent with an allowance for credit losses of ~~$2,300.~~

$4,675.

The following table sets forth information regarding the Company’s non-performing assets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Mortgage loans:	Mortgage loans:				Mortgage loans:
Residential	Residential	$	3,120	6,072	Residential	$	1,698	1,928
Commercial	Commercial	35,352		16,887	Commercial	7,279		28,212
Multi-family	Multi-family	1,583		439	Multi-family	2,314		1,565
Construction	Construction	1,878		2,365	Construction	1,874		1,878
Total mortgage loans	Total mortgage loans	41,933		25,763	Total mortgage loans	13,165		33,583
Commercial loans	Commercial loans	17,181		20,582	Commercial loans	31,885		24,188
Consumer loans	Consumer loans	387		1,682	Consumer loans	878		738

Total non-performing loans	Total non-performing loans	59,501		48,027	Total non-performing loans	45,928		58,509
Foreclosed assets	Foreclosed assets	2,053		8,731	Foreclosed assets	13,697		2,124
Total non-performing assets	Total non-performing assets	$	61,554	56,758	Total non-performing assets	$	59,625	60,633

The following table sets forth information regarding the Company’s 60-89 day delinquent loans as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 (in thousands):


		September 30, 2022		December 31, 2021		June 30, 2023		December 31, 2022
Mortgage loans:	Mortgage loans:				Mortgage loans:
Residential	Residential	$	302	1,131	Residential	$	1,171	1,114
Commercial	Commercial	—		3,960	Commercial	1,137		412

Total mortgage loans	Total mortgage loans	302		5,091	Total mortgage loans	2,308		2,623
Commercial loans	Commercial loans	1,135		1,289	Commercial loans	90		1,014
Consumer loans	Consumer loans	379		228	Consumer loans	147		147
Total 60-89 day delinquent loans	Total 60-89 day delinquent loans	$	1,816	6,608	Total 60-89 day delinquent loans	$	2,545	3,784

At ~~September~~June 30, ~~2022,~~2023, the Company’s allowance for credit losses related to the loan portfolio was ~~0.88%~~0.97% of total loans, compared to ~~0.84%~~0.79% at December 31, ~~2021~~2022 and ~~September~~June 30, ~~2021,~~2022, respectively. The Company recorded a provision for credit losses on loans of ~~$8.4~~

$10.4 million and ~~$5.0~~$16.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared with a provision of ~~$1.0~~$3.0 million and a negative provision of ~~$24.7~~$3.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company had net ~~recoveries~~charge-offs of ~~$1.2~~$1.1 million and ~~$2.9~~$1.8 million, respectively, compared to net charge-offs of ~~$1.9 million~~$259,000 and net recoveries of ~~$3.3~~$1.7 million, respectively, for the same periods in ~~2021.~~2022. The allowance for credit losses increased ~~$7.9~~$14.1 million to ~~$88.6~~$102.1 million at ~~September~~June 30, ~~2022~~2023 from ~~$80.7~~$88.0 million at December 31, ~~2021.~~2022. The ~~increase~~increases in provision for both periods was primarily attributable to a worsened economic forecast and related deterioration in the ~~period-over-period provision for credit losses was largely a function~~projected commercial property price indices over the expected life of the ~~significant favorable impact of the post-pandemic recovery resulting in a large negative provision taken in the prior year period,~~loan portfolio within our CECL model, combined with ~~the current weakening economic forecast and~~ an increase in total loans outstanding.

Total non-performing loans were ~~$59.5~~$45.9 million, or ~~0.59%~~0.44% of total loans at ~~September~~June 30, ~~2022,~~2023, compared to ~~$48.0~~$58.5 million, or ~~0.50%~~0.57% of total loans at December 31, ~~2021.~~2022. The ~~$11.5~~$12.6 million ~~increase~~decrease in non-performing loans consisted of ~~an $18.5~~a $20.9 million ~~increase~~decrease in non-performing commercial mortgage loans and a $230,000 decrease in non-performing residential mortgage loans, partially offset by a ~~$3.4~~$7.7 million ~~decrease~~increase in non-performing commercial loans and a ~~$3.0 million decrease in non-performing residential mortgage loans, a $1.3 million decrease~~$140,000 increase in non-performing consumer ~~loans and a $487,000 decrease in non-performing construction~~ loans.

At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company held foreclosed assets of ~~$2.1~~$13.7 million and ~~$8.7~~$2.1 million, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, there were ~~four~~three additions to foreclosed assets with an aggregate carrying value of ~~$1.1~~$12.3 million and three properties sold with an aggregate carrying value of ~~$7.6 million and a valuation charge of $200,000.~~$768,000. Foreclosed assets at ~~September~~June 30, ~~2022~~2023 consisted primarily of commercial real estate. Total non-performing assets at ~~September~~June 30, ~~2022 increased $4.8~~2023 decreased $1.0 million to ~~$61.6~~$59.6 million, or ~~0.45%~~0.42% of total assets, from ~~$56.8~~$60.6 million, or ~~0.41%~~0.44% of total assets at December 31, ~~2021.~~2022.

~~Cash and cash equivalents~~Total investment securities were ~~$184.9 million~~$2.22 billion at ~~September~~June 30, ~~2022,~~2023, a ~~$527.6~~$37.8 million decrease from December 31, ~~2021, primarily due to the reinvestment of excess liquidity into higher yielding loans, combined with a decrease in short term investments.~~

~~Total investments were $2.28 billion at September 30, 2022, a $250.5 million decrease from December 31, 2021.~~2022. This decrease was primarily due to ~~an increase in unrealized losses on available for sale debt securities,~~ repayments of mortgage-backed securities and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities and an improvement in unrealized losses on available for sale debt securities.

Total deposits decreased ~~$548.4~~$301.9 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, to ~~$10.69~~$10.26 billion. Total savings and demand deposit accounts decreased ~~$536.0~~$570.8 million to ~~$10.01~~$9.24 billion at ~~September~~June 30, ~~2022,~~2023, while total time deposits ~~decreased $12.4~~increased $268.9 million to ~~$680.1 million~~$1.02 billion at ~~September~~June 30, ~~2022.~~2023. The decrease in savings and demand deposits was largely attributable to a ~~$296.3~~$285.5 million decrease in ~~interest~~non-interest bearing demand deposits, ~~as the Company shifted $360.0 million of brokered demand deposits into lower-costing Federal Home Loan Bank of New York ("FHLB") borrowings,~~ a ~~$196.9~~$269.5 million decrease in money market deposits and ~~an $84.1~~a $163.3 million decrease in ~~non-interest bearing demand~~savings deposits, partially offset by a ~~$41.3~~$147.6 million increase in ~~savings~~interest bearing demand deposits. During the six months ended June 30, 2023, deposit balances from traditional non-interest and interest bearing demand deposits transitioned into our insured cash sweep ("ICS") product, as a method to increase the level of customers' deposit insurance in light of recent deposit turmoil in the banking industry. The ~~decrease~~Bank's ICS deposits increased $324.0 million to $382.9 million at June 30, 2023, from $58.9 million at December 31, 2022. The increase in time deposits ~~was primarily due to maturities~~consisted of ~~longer-term~~a $258.3 million increase in retail time deposits ~~partially offset by the inflow of~~and a $10.6 million increase in brokered time deposits.

Borrowed funds increased ~~$436.8~~$512.3 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, to ~~$1.06~~$1.85 billion. The increase in borrowings was largely due to asset funding requirements, partially to replace the ~~maturity and replacement~~outflow of ~~brokered deposits into lower-costing FHLB borrowings.~~deposits. Borrowed funds represented ~~7.8%~~13.2% of total assets at ~~September~~June 30, ~~2022,~~2023, an increase from ~~4.5%~~9.7% at December 31, ~~2021.~~2022.

Stockholders’ equity ~~decreased $146.1~~increased $44.8 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, to ~~$1.55~~$1.64 billion, primarily due to net income earned for the period and an ~~increase~~improvement in unrealized losses on available for sale debt securities, partially offset by cash dividends paid to ~~stockholders and common stock repurchases, partially offset by net income earned for the period.~~stockholders. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, common stock repurchases totaled ~~2,045,037~~71,357 shares at an average cost of ~~$23.23~~$23.32 per share, all of which ~~17,746 shares, at an average cost of $23.52 per share,~~ were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. At ~~September~~June 30, ~~2022,~~2023, approximately 1.1 million shares remained eligible for repurchase under the current stock repurchase authorization.

Liquidity and Capital Resources. Liquidity refers to the Company’s ability to generate adequate amounts of cash to meet financial obligations to its depositors, to fund loans and securities purchases and operating expenses. Sources of funds include scheduled amortization of loans, loan prepayments, scheduled maturities of unpledged investments, cash flows from ~~mortgage-backed~~ securities and the ability to borrow funds from the FHLBNY and approved broker-dealers.

Cash flows from loan payments and maturing investment securities are fairly predictable sources of funds. Changes in interest rates, local economic conditions ~~the COVID-19 pandemic and related government response~~ and the competitive marketplace can influence loan prepayments, prepayments on mortgage-backed securities and deposit flows. For six months ended June 30, 2023 and 2022, loan repayments totaled $1.50 billion and $1.70 billion, respectively.

~~In response to the COVID-19 pandemic,~~

As deposits have declined, the Company ~~escalated the monitoring of~~has continued to monitor and focus on deposit behavior ~~utilization of credit lines,~~ and borrowing capacity with the FHLBNY and FRBNY, with current borrowing capacity of $1.31 billion and ~~continues~~$1.69 billion, respectively at June 30, 2023. Our estimated uninsured and uncollateralized deposits at June 30, 2023 totaled $2.72 billion. At June 30, 2023, Provident Bank

had on balance sheet liquidity and borrowing capacity totaling $3.82 billion, representing 140% of estimated uninsured and uncollateralized deposits. All borrowing capacity is immediately available.

The Bank established the Bank Term Funding Program with the Federal Reserve Bank of New York in March and pledged approximately $521 million in unencumbered security collateral to ~~enhance~~the facility improving its ~~collateral position with these funding sources.~~access to immediate funding. Advances under the Program can be requested until March 11, 2024. As of June 30, 2023, the Company had not taken any advances under the Program, but has this option available as a short term liquidity source.

During the six months ended June 30, 2023, deposit balances from traditional non-interest and interest bearing demand deposits transitioned into our ICS product, as a method to increase the level of customers' deposit insurance in light of recent banking turmoil. As of June 30, 2023, our ICS deposits totaled $382.9 million, compared to $58.9 million at December 31, 2022.

The Federal Deposit Insurance Corporation ("FDIC") and the other federal bank regulatory agencies issued a final rule that revised the leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act, that were effective January 1, 2015. Among other things, the rule established a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), adopted a uniform minimum leverage capital ratio at 4%, increased the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on non-accrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The rule also required unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital unless a one-time opt-out was exercised. The Company exercised the option to exclude unrealized gains and losses from the calculation of regulatory capital. Additional constraints were also imposed on the inclusion in regulatory capital of mortgage-servicing assets, deferred tax assets and minority interests. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer,” of 2.5% in addition to the amount necessary to meet its minimum risk-based capital requirements.

In the first quarter of 2020, U.S. federal regulatory authorities issued an interim final rule providing banking institutions that adopted CECL during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a ~~five year~~five-year transition in total). In connection with its adoption of CECL on January 1, 2020, the Company elected to utilize the five-year CECL transition.

At ~~September~~June 30, ~~2022,~~2023, the Bank and the Company exceeded all current minimum regulatory capital requirements as follows:


		September 30, 2022													June 30, 2023
		Required				Required with Capital Conservation Buffer				Actual					Required				Required with Capital Conservation Buffer			Actual
		Amount		Ratio		Amount		Ratio		Amount		Ratio			Amount		Ratio		Amount	Ratio		Amount	Ratio
		(Dollars in thousands)													(Dollars in thousands)
Bank:(1)	Bank:(1)													Bank:(1)
Tier 1 leverage capital	Tier 1 leverage capital	$	526,697	4.00	%	$	526,697	4.00	%	$	1,222,092	9.28	%	Tier 1 leverage capital	$	535,118	4.00	%	535,118	4.00	%	1,316,418	9.84	%
Common equity Tier 1 risk-based capital	Common equity Tier 1 risk-based capital	525,767		4.50		817,860		7.00		1,222,092		10.46		Common equity Tier 1 risk-based capital	528,994		4.50		822,880	7.00		1,316,418	11.20
Tier 1 risk-based capital	Tier 1 risk-based capital	701,023		6.00		993,116		8.50		1,222,092		10.46		Tier 1 risk-based capital	705,325		6.00		999,211	8.50		1,316,418	11.20
Total risk-based capital	Total risk-based capital	934,697		8.00		1,226,790		10.50		1,302,104		11.14		Total risk-based capital	940,434		8.00		1,234,320	10.50		1,411,146	12.00

Company:	Company:													Company:
Tier 1 leverage capital	Tier 1 leverage capital	$	526,913	4.00	%	$	526,913	4.00	%	$	1,288,635	9.78	%	Tier 1 leverage capital	$	535,343	4.00	%	535,343	4.00	%	1,368,362	10.22	%
Common equity Tier 1 risk-based capital	Common equity Tier 1 risk-based capital	526,004		4.50		818,228		7.00		1,275,748		10.91		Common equity Tier 1 risk-based capital	529,252		4.50		823,280	7.00		1,355,475	11.53
Tier 1 risk-based capital	Tier 1 risk-based capital	701,338		6.00		993,562		8.50		1,288,635		11.02		Tier 1 risk-based capital	705,669		6.00		999,698	8.50		1,368,362	11.63
Total risk-based capital	Total risk-based capital	935,117		8.00		1,227,342		10.50		1,368,647		11.71		Total risk-based capital	940,892		8.00		1,234,921	10.50		1,463,090	12.44

(1) Under the FDIC's prompt corrective action provisions, the Bank is considered well capitalized if it has: a leverage (Tier 1) capital ratio of at least 5.00%; a common equity Tier 1 risk-based capital ratio of 6.50%; a Tier 1 risk-based capital ratio of at least 8.00%; and a total risk-based capital ratio of at least 10.00%.

COMPARISON OF OPERATING RESULTS FOR THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2022~~2023 AND ~~2021~~2022

General. The Company reported net income of ~~$43.4~~$32.0 million, or ~~$0.58~~$0.43 per basic and diluted share for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to net income of ~~$37.3~~$39.2 million, or ~~$0.49~~$0.53 per basic and diluted share, for the three months ended ~~September~~June 30, ~~2021.~~2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company reported net income of ~~$126.6~~$72.5 million, or ~~$1.69~~$0.97 per basic share and diluted share, compared to net income of ~~$130.6~~$83.2 million, or ~~$1.71~~$1.11 per basic ~~share~~ and ~~$1.70 per~~ diluted share, for the ~~nine~~six months ended ~~September~~June 30, ~~2021. Current quarter earnings were~~2022.

Net income for the three and six months ended June 30, 2023, was negatively impacted by ~~$2.9 million of non-tax deductible~~an increase in funding costs and an increase in the provision for credit losses due to a worsened economic forecast. In addition, transaction costs related to ~~the~~our pending merger with Lakeland ~~that was announced~~Bancorp, Inc. (“Lakeland”) totaled $2.0 million and $3.1 million for the three and six months ended June 30, 2023, respectively.

The following tables sets forth certain information for the three and six months ended June 30, 2023. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on ~~September 27, 2022.~~average interest-bearing liabilities is expressed both in dollars and rates. No tax equivalent adjustments were made. Average balances are daily averages.


	For the three months ended
	June 30, 2023						June 30, 2022
	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest	Average Yield/Cost
	(Dollars in Thousands) (Unaudited)
Interest Earning Assets:
Deposits	$	73,470	$	947	5.17	%	77,761		191	0.98	%
Federal funds sold and other short-term investments	88		1		6.75	%	99,825		371	1.49	%
Available for sale debt securities	1,801,050		10,290		2.29	%	2,023,199	5352	8,093	1.60	%
Held to maturity debt securities, net (1)	379,958		2,357		2.48	%	412,229		2,489	2.41	%
Equity securities, at fair value	1,006		—		—	%	1,019		—	—	%
Federal Home Loan Bank stock	82,171		1,142		5.56	%	31,682		361	4.55	%
Net loans: (2)
Total mortgage loans	7,701,072		99,302		5.11	%	7,252,665		69,073	3.78	%
Total commercial loans	2,234,043		31,426		5.59	%	2,107,681		22,363	4.22	%
Total consumer loans	303,109		4,431		5.86	%	322,681		3,344	4.16	%
Total net loans	10,238,224		135,159		5.24	%	9,683,027		94,780	3.89	%
Total interest earning assets	$	12,575,967	$	149,896	4.73	%	12,328,742		106,285	3.43	%
Non-Interest Earning Assets:
Cash and due from banks	129,979						129,953
Other assets	1,127,109						1,082,514

Total assets	$	13,833,055					13,541,209
Interest Bearing Liabilities:
Demand deposits	$	5,620,268	$	28,613	2.04	%	6,189,722		4,458	0.29	%
Savings deposits	1,307,830		537		0.16	%	1,496,064		285	0.08	%
Time deposits	968,344		7,297		3.02	%	695,015		833	0.48	%
Total deposits	7,896,442		36,447		1.85	%	8,380,801		5,576	0.27	%
Borrowed funds	1,658,809		14,088		3.41	%	527,630		1,104	0.84	%
Subordinated debentures	10,563		255		9.66	%	10,355		130	5.05	%
Total interest bearing liabilities	$	9,565,814	50,790		2.13	%	8,918,786		6,810	0.31	%
Non-Interest Bearing Liabilities:
Non-interest bearing deposits	$	2,368,960					2,776,507
Other non-interest bearing liabilities	244,604						244,671
Total non-interest bearing liabilities	2,613,564						3,021,178
Total liabilities	12,179,378						11,939,964
Stockholders' equity	1,653,677						1,601,245
Total liabilities and stockholders' equity	$	13,833,055					13,541,209
Net interest income			$	99,106					99,475
Net interest rate spread					2.60	%				3.12	%
Net interest-earning assets	$	3,010,153					3,409,956
Net interest margin (3)					3.11	%				3.21	%
Ratio of interest-earning assets to total interest-bearing liabilities	1.31x						1.38x



(1)			Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses.
(2)			Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans.
(3)			Annualized net interest income divided by average interest-earning assets.


	For the six months ended
	June 30, 2023						June 30, 2022
	Average Balance		Interest		Average Yield/Cost		Average Balance	Interest	Average Yield/Cost
	(Dollars in Thousands) (Unaudited)
Interest Earning Assets:
Deposits	$	72,750	$	1,791	4.97	%	175,341	298	0.34	%
Federal funds sold and other short-term investments	59		2		6.00	%	147,447	911	1.25	%
Available for sale debt securities	1,804,814		20,692		2.29	%	2,069,270	15,671	1.51	%
Held to maturity debt securities, net (1)	381,921		4,725		2.47	%	420,133	5,085	2.42	%
Equity securities, at fair value	999		—		—	%	1,055	—	—	%
Federal Home Loan Bank stock	70,702		2,170		6.14	%	31,296	735	4.70	%
Net loans: (2)
Total mortgage loans	7,671,493		195,290		5.07	%	7,156,189	132,908	3.70	%
Total commercial loans	2,191,222		60,109		5.49	%	2,105,001	45,184	4.30	%
Total consumer loans	303,724		8,673		5.76	%	321,796	6,483	4.06	%
Total net loans	10,166,439		264,072		5.18	%	9,582,986	184,575	3.84	%
Total interest earning assets	$	12,497,684	$	293,452	4.68	%	12,427,528	207,275	3.33	%
Non-Interest Earning Assets:
Cash and due from banks	136,431						126,423
Other assets	1,149,044						1,062,948
Total assets	$	13,783,159					13,616,899
Interest Bearing Liabilities:
Demand deposits	$	5,695,507	$	50,533	1.79	%	6,238,860	8,653	0.28	%
Savings deposits	1,352,874		990		0.15	%	1,486,407	576	0.08	%
Time deposits	914,358		12,434		2.74	%	687,956	1,534	0.45	%
Total deposits	7,962,739		63,957		1.62	%	8,413,223	10,763	0.26	%
Borrowed funds	1,442,744		21,564		3.01	%	538,593	2,272	0.85	%
Subordinated debentures	10,537		501		9.58	%	10,328	239	4.66	%
Total interest bearing liabilities	$	9,416,020	86,022		1.84	%	8,962,144	13,274	0.30	%
Non-Interest Bearing Liabilities:
Non-interest bearing deposits	$	2,459,375					2,781,248
Other non-interest bearing liabilities	267,666						229,958
Total non-interest bearing liabilities	2,727,041						3,011,206
Total liabilities	12,143,061						11,973,350
Stockholders' equity	1,640,099						1,643,549
Total liabilities and stockholders' equity	$	13,783,160					13,616,899
Net interest income			$	207,430				194,001
Net interest rate spread					2.84	%			3.03	%
Net interest-earning assets	$	3,081,664					3,465,384
Net interest margin (3)					3.29	%			3.11	%
Ratio of interest-earning assets to total interest-bearing liabilities	1.33x						1.39x



(1)			Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses.
(2)			Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans.
(3)			Annualized net interest income divided by average interest-earning assets.

Net Interest Income. ~~Total net~~Net interest income ~~increased $18.3 million~~decreased $369,000 to ~~$109.5~~$99.1 million for the three months ended ~~September~~June 30, ~~2022,~~2023, from ~~$91.2~~$99.5 million for same period in 2022. For the ~~three~~six months ended ~~September~~June 30, ~~2021. For the nine months ended September 30, 2022,~~2023, total net interest income increased ~~$31.4~~$13.4 million to ~~$303.5~~$207.4 million, from ~~$272.1~~$194.0 million for the same period in 2021. Interest income for the three months ended September 30, 2022 increased $22.1 million to $121.7 million, from $99.6 million for the same period in 2021. For the nine months ended September 30, 2022, interest income increased $28.3 million to $329.0 million, from $300.7 million for the nine months ended September 30, 2021. Interest expense increased $3.9 million to $12.2 million for the three months ended September 30, 2022, from $8.4 million for the three months ended September 30, 2021. For the nine months ended September 30, 2022, interest expense decreased $3.0 million to $25.5 million, from $28.5 million for the nine months ended September 30, 2021.2022. The ~~increase~~decrease in net interest income for the three months ended ~~September~~June 30, ~~2022,~~2023, was ~~largely~~primarily due to a decrease in lower-costing deposits and an increase in borrowings, combined with unfavorable repricing of both deposits and borrowings, partially offset by originations of new loans and the ~~period over period~~favorable repricing of adjustable-rate loans. The increase in net interest income for the six months ended June 30, 2023, was primarily driven by an increase in the net interest margin resulting from the favorable repricing of ~~adjustable rate~~adjustable-rate loans, higher market rates on new loan originations and the ~~reinvestment~~originations of ~~cash flows from investment securities into~~ higher-yielding ~~loans. This was~~loans, partially offset by the ~~more modest~~ unfavorable repricing of ~~interest-bearing liabilities. For the three months ended September 30, 2022,~~both deposits and borrowings, a decrease in lower-costing deposits and an increase in borrowings. Additionally, fees related to the forgiveness of PPP loans, ~~decreased $2.4 million to $100,000,~~which are recognized in interest income, were approximately $4,000 for the six months ended June 30, 2023, compared to ~~$2.5~~$1.3 million for the ~~three~~six months ended ~~September~~June 30, 2021. The increase in net interest income for the nine months ended September 30, 2022, was primarily driven by the favorable repricing of adjustable rate loans and an increase in rates on new loan originations. Net interest income was further enhanced by growth in lower-costing core and non-interest bearing deposits and increases in available for sale debt securities and total loans outstanding. This was partially offset by a reduction in fees related to the forgiveness of PPP loans. For the nine months ended September 30, 2022, fees related to the forgiveness of PPP loans decreased $7.9 million to $1.4 million, compared to $9.3 million for the nine months ended September 30, 2021.2022.

The net interest margin ~~increased 57~~decreased 10 basis points to ~~3.51%~~3.11% for the quarter ended ~~September~~June 30, ~~2022,~~2023, compared to ~~2.94%~~3.21% for the quarter ended ~~September~~June 30, ~~2021.~~2022. The weighted average yield on interest-earning assets increased 69130 basis points to ~~3.90%~~4.73% for the quarter ended ~~September~~June 30, ~~2022,~~2023, compared to ~~3.21%~~3.43% for the quarter ended ~~September~~June 30, ~~2021,~~2022, while the weighted average cost of ~~interest bearing~~interest-bearing liabilities increased 17182 basis points for the quarter ended ~~September~~June 30, ~~2022~~2023, to ~~0.54%~~2.13%, compared to the quarter ended ~~September~~June 30, ~~2021.~~2022. The average cost of ~~interest bearing~~interest-bearing deposits for the quarter ended

~~September~~ June 30, ~~2022~~2023, was ~~0.47%~~1.85%, compared to ~~0.30%~~0.27% for the same period last year. Average non-interest bearing demand deposits totaled ~~$2.75~~$2.37 billion for the quarter ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$2.55~~$2.78 billion for the quarter ended ~~September~~June 30, ~~2021.~~2022. The average cost of total deposits, including non-interest bearing deposits, was ~~0.35%~~1.42% for the quarter ended ~~September~~June 30, ~~2022,~~2023, compared with ~~0.23%~~0.20% for the quarter ended ~~September~~June 30, ~~2021.~~2022. The average cost of borrowed funds for the quarter ended ~~September~~June 30, ~~2022~~2023, was ~~1.11%~~3.41%, compared to ~~1.08%~~0.84% for the same period last year.

For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the net interest margin increased 2518 basis points to ~~3.24%~~3.29%, compared to ~~2.99%~~3.11% for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The weighted average yield on ~~interest earning~~interest-earning assets increased 20135 basis points to ~~3.51%~~4.68% for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~3.31%~~3.33% for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, while the weighted average cost of ~~interest bearing~~interest-bearing liabilities ~~decreased five~~increased 154 basis points to ~~0.38%~~1.84% for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~0.43%~~0.30% for the same period last year. The average cost of ~~interest bearing~~interest-bearing deposits ~~decreased one~~increased 136 basis ~~point~~points to ~~0.33%~~1.62% for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~0.34%~~0.26% for the same period last year. Average non-interest bearing demand deposits totaled ~~$2.77~~$2.46 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared with ~~$2.47~~$2.78 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The average cost of total deposits, including non-interest bearing deposits, was ~~0.25%~~1.24% for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared with ~~0.26%~~0.19% for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The average cost of borrowings for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023, was ~~0.97%~~3.01%, compared to ~~1.13%~~0.85% for the same period last year.

Interest income on loans secured by real estate increased ~~$17.8~~$30.2 million to ~~$80.3~~$99.3 million for the three months ended ~~September~~June 30, ~~2022,~~2023, from ~~$62.5~~$69.1 million for the three months ended ~~September~~June 30, ~~2021.~~2022. Commercial loan interest income increased ~~$747,000~~$9.1 million to ~~$25.2~~$31.4 million for the three months ended ~~September~~June 30, ~~2022,~~2023, from ~~$24.5~~$22.4 million for the three months ended ~~September~~June 30, ~~2021.~~2022. Consumer loan interest income increased ~~$440,000~~$1.1 million to ~~$3.8~~$4.4 million for the three months ended ~~September~~June 30, ~~2022,~~2023, from $3.3 million for the three months ended ~~September~~June 30, ~~2021.~~2022. For the three months ended ~~September~~June 30, ~~2022,~~2023, the average balance of total loans increased ~~$475.8~~$555.2 million to ~~$9.91~~$10.24 billion, compared to the same period in ~~2021.~~2022. The average yield on total loans for the three months ended ~~September~~June 30, ~~2022,~~2023, increased 61135 basis points to ~~4.38%~~5.24%, from ~~3.77%~~3.89% for the same period in ~~2021.~~2022.

Interest income on loans secured by real estate increased ~~$25.8~~$62.4 million to ~~$213.2~~$195.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, from ~~$187.4~~$132.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Commercial loan interest income ~~decreased $5.4~~increased $14.9 million to ~~$70.4~~$60.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, from ~~$75.8~~$45.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Consumer loan interest income increased ~~$19,000~~$2.2 million to ~~$10.3~~$8.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, from ~~$10.2~~$6.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the average balance of total loans was ~~$9.69~~$10.17 billion, compared with $9.58 billion for the same period in ~~2021.~~2022. The average yield on total loans for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, increased 23134 basis points to ~~4.01%~~5.18%, from ~~3.78%~~3.84% for the same period in ~~2021.~~2022.

Interest income on held to maturity debt securities decreased ~~$222,000~~$132,000 to $2.4 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period last year. Average held to maturity debt securities decreased ~~$33.1~~$32.3 million to ~~$399.4~~$380.0 million for the three months ended ~~September~~June 30, ~~2022,~~2023, from ~~$432.5~~$412.2 million for the same period last year. Interest income on held to maturity debt securities decreased ~~$621,000~~$360,000 to ~~$7.5~~$4.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. Average held to maturity debt securities decreased ~~$27.1~~$38.2 million to ~~$413.1~~$381.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, from ~~$440.3~~$420.1 million for the same period last year.

Interest income on available for sale debt securities and FHLBNY stock increased ~~$3.7~~$3.0 million to ~~$9.6~~$11.4 million for the three months ended ~~September~~June 30, ~~2022,~~2023, from ~~$5.9~~$8.5 million for the three months ended ~~September~~June 30, ~~2021.~~2022. The average balance of available for sale debt securities and FHLBNY stock ~~increased $320.6~~decreased $171.7 million to ~~$2.00~~$1.88 billion for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period in ~~2021.~~2022. Interest income on available for sale debt securities and FHLBNY stock increased ~~$8.8~~$6.5 million to ~~$26.0~~$22.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, from ~~$17.2~~$16.4 million for the same period last year. The average balance of available for sale debt securities and FHLBNY stock ~~increased $626.5~~decreased $225.1 million to ~~$2.07~~$1.88 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023.

The average yield on total securities increased to ~~2.36%~~2.53% for the three months ended ~~September~~June 30, ~~2022,~~2023, compared with ~~1.32%~~1.74% for the same period in ~~2021.~~2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the average yield on total securities increased to ~~1.72%~~2.52%, compared with ~~1.47%~~1.59% for the same period in ~~2021.~~2022.

Interest expense on deposit accounts increased ~~$3.3~~$30.9 million to ~~$9.6 million for the three month ended September 30, 2022, compared with $6.3~~$36.4 million for the three months ended ~~September~~June 30, ~~2021.~~2023, compared with $5.6 million for the three months ended June 30, 2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, interest expense on deposit accounts ~~decreased $173,000~~increased $53.2 million to ~~$20.3~~$64.0 million, from ~~$20.5~~$10.8 million for the same period last year. The average cost of ~~interest bearing~~interest-bearing deposits increased to ~~0.47%~~1.85% and ~~decreased to 0.33%~~1.62% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, from ~~0.30%~~0.27% and ~~0.34%~~0.26% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~

2022, respectively. The average balance of ~~interest bearing~~interest-bearing core deposits, which consist of total savings and demand deposits, for the three months ended ~~September~~June 30, ~~2022 increased $13.4~~2023, decreased $757.7 million to ~~$7.42~~$6.93 billion. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, average ~~interest bearing~~interest-bearing core deposits ~~increased $563.2~~decreased $676.9 million, to ~~$7.62~~$7.05 billion, from ~~$7.06~~$7.73 billion for the same period in ~~2021.~~2022. Average time deposit account balances ~~decreased $135.3~~increased $273.3 million to ~~$669.6~~$968.3 million for the three months ended ~~September~~June 30, ~~2022,~~2023, from ~~$804.9~~$695.0 million for the three months ended ~~September~~June 30, ~~2021.~~2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, average time deposit account balances ~~decreased $232.5~~increased $226.4 million to ~~$681.8~~$914.4 million, from ~~$914.3~~$688.0 million for the same period in ~~2021.~~2022.

Interest expense on borrowed funds increased ~~$750,000~~$13.0 million to ~~$2.5~~$14.1 million for the three months ended ~~September~~June 30, ~~2022,~~2023, from ~~$1.8~~$1.1 million for the three months ended ~~September~~June 30, ~~2021.~~2022. For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, interest expense on borrowed funds ~~decreased $2.3~~increased $19.3 million to ~~$4.8~~$21.6 million, from ~~$7.1~~$2.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The average cost of borrowings increased to ~~1.11%~~3.41% for the three months ended ~~September~~June 30, ~~2022,~~2023, from ~~1.08%~~0.84% for the three months ended ~~September~~June 30, ~~2021.~~2022. The average cost of borrowings ~~decreased~~increased to ~~0.97%~~3.01% for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, from ~~1.13%~~0.85% for the same period last year. Average borrowings increased ~~$256.4 million~~$1.13 billion to ~~$908.8~~$1.66 billion for the three months ended June 30, 2023, from $527.6 million for the three months ended ~~September~~June 30, ~~2022, from $652.4~~2022. For the six months ended June 30, 2023, average borrowings increased $904.2 million to $1.44 billion, compared to $538.6 million for the ~~three~~six months ended ~~September~~June 30, ~~2021. For the nine months ended September 30, 2022, average borrowings decreased $180.9 million to $663.4 million, compared to $844.2 million for the nine months ended September 30, 2021.~~2022.

Provision for Credit Losses. Provisions for credit losses are charged to operations in order to maintain the allowance for credit losses at a level management considers necessary to absorb projected credit losses that may arise over the expected term of each loan in the portfolio. In determining the level of the allowance for credit losses, management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable economic forecasts. The amount of the allowance is based on estimates, and the ultimate losses may vary from such estimates as more information becomes available or later events change. Management assesses the adequacy of the allowance for credit losses on a quarterly basis and makes provisions for credit losses, if necessary, in order to maintain the valuation of the allowance.

The Company recorded ~~an $8.4~~a $10.4 million and ~~$5.0~~$16.4 million provision for credit losses on loans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, compared with a provision of ~~$1.0~~$3.0 million and a negative provision of ~~$24.7~~$3.4 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, respectively. The increase in the provision for credit losses infor the ~~quarter~~three and six months ended June 30, 2023 was largely a function of a ~~weakening~~worsened economic forecast ~~combined with additional specific reserves on impaired commercial loans of $2.4 million. The increase~~and related deterioration in the ~~period-over-period provision for credit losses for~~projected commercial property price indices over the ~~nine months ended September 30, 2022 was largely a function~~expected life of the ~~significant favorable impact of the post-pandemic recovery resulting in a large negative provision taken in the prior year period,~~loan portfolio within our CECL model, combined with ~~the current weakening economic forecast and~~ an increase in total loans outstanding.

Non-Interest Income. Non-interest income totaled ~~$28.4~~$19.4 million for the quarter ended ~~September~~June 30, ~~2022, an increase~~2023, a decrease of ~~$5.1~~$1.5 million, compared to the same period in ~~2021. Other~~2022. Fee income ~~increased $6.2~~decreased $1.6 million to ~~$10.4~~$5.8 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the trailing quarter, ~~ended September 30, 2021,~~ primarily due to ~~an $8.6 million gain realized on the sale of a foreclosed~~decreases in commercial ~~office property~~loan prepayment fees and deposit fee income. Other income decreased $647,000 to a purchaser who intends to reposition the property to industrial use in the current quarter, partially offset by the prior year $3.4 million reduction in the contingent consideration related to the earn-out provisions of the 2019 purchase of Tirschwell & Loewy, Inc. ("T&L"). Additionally, insurance agency income increased $432,000 to $2.9$1.3 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the quarter ended ~~September~~June 30, ~~2021, largely~~2022, primarily due to ~~strong retention revenue.~~a decrease in net gains on sales of SBA loans. Partially offsetting these ~~increases~~decreases in non-interest income, ~~wealth management~~insurance agency income ~~decreased $1.1 million~~increased $997,000 to ~~$6.8~~$3.8 million for the three months ended ~~September~~June 30, 2023, compared to the quarter ended June 30, 2022, largely due to strong retention revenue and new business activity.

For the six months ended June 30, 2023, non-interest income totaled $41.5 million, an increase of $462,000, compared to the same period in ~~2021,~~2022. Insurance agency income increased $1.7 million to $8.0 million for the six months ended June 30, 2023, compared to $6.3 million for the same period in 2022, largely due to increases in contingent commissions, retention revenue

and new business activity. Other income increased $1.4 million to $4.6 million for the six months ended June 30, 2023, compared to $3.1 million for the same period in 2022, mainly due to a $2.0 million gain related to the resolution of certain post-closing conditions following the September 2022 sale of a foreclosed commercial property, combined with an increase in the gains on sales of SBA loans, partially offset by a decrease in net fees on loan-level interest rate swap transactions. Additionally, BOLI income increased $277,000 to $3.0 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to greater equity valuations, partially offset by a decrease in benefit claims recognized. Partially offsetting these increases to non-interest income, fee income decreased $2.2 million to $12.2 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to a decrease in commercial loan prepayment fees, while wealth management income decreased $655,000 to $13.8 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to a decrease in the market value of assets under management, while BOLI income decreased $643,000 compared to the quarter ended September 30, 2021, to $1.2 million for the three months ended September 30, 2022, primarily due to a benefit claim recognized in the prior year.

For the nine months ended September 30, 2022, non-interest income totaled $69.5 million, an increase of $3.4 million, compared to the same period in 2021. Other income increased $7.1 million to $13.5 million for the nine months ended September 30, 2022, compared to $6.4 million for the same period in 2021, primarily due to an $8.6 million gain realized on the sale of a foreclosed commercial office property to a purchaser who intends to reposition the property to industrial use and an increase in fees on loan-level interest rate swap transactions, partially offset by income recognized from a $3.4 million reduction in the contingent consideration related to the earn-out provisions of the 2019 purchase of T&L which was recorded in the prior year. Insurance agency income increased $1.1 million to $9.1 million for the nine months ended September 30, 2022, compared to $8.0 million for the same period in 2021, largely due to increases in contingent commissions, retention revenue and new business activity. Partially offsetting these increases to non-interest income, BOLI income decreased $2.0 million to $4.0 million for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to a decrease in benefit claims recognized and lower equity valuations. Wealth management income decreased $1.6 million to $21.3 million for the nine months ended September 30, 2022, compared to the same period in 2021, primarily due to a decrease in the market

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

Non-Interest Expense. For the three months ended ~~September~~June 30, ~~2022,~~2023, non-interest expense totaled ~~$69.4~~$64.5 million, an increase of ~~$6.0 million,~~$617,000, compared to the three months ended ~~September~~June 30, ~~2021. Other operating~~2022. Merger-related expenses ~~increased $3.3 million to $12.2~~totaled $2.0 million for the three months ended ~~September~~June 30, ~~2022,~~2023, as a result of transaction costs related to our pending combination with Lakeland. FDIC insurance expense increased $775,000 to $2.1 million for the three months ended June 30, 2023, compared to the same period in ~~2021,~~2022, primarily due to ~~$2.9~~an increase in the assessment rate. The Company recorded a $647,000 negative provision for credit losses for off-balance sheet credit exposures, compared to a $973,000 negative provision for the same period in 2022. The $326,000 reduction in the provision benefit was primarily the result of the period-over-period relative changes in line of credit utilization. Partially offsetting these increases in non-interest expense, compensation and benefits expense decreased $2.2 million ~~of transaction costs related~~ to $35.3 million for three months ended June 30, 2023, compared to $37.4 million for the ~~recently announced pending merger with Lakeland. Data processing expense increased $772,000~~same period in 2022. The decrease was principally due to ~~$5.6~~decreases in the accrual for incentive compensation and stock-based compensation, partially offset by an increase in salary expense. Net occupancy expenses decreased $530,000 to $7.9 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period in ~~2021~~2022, largely due to ~~increases~~decreases in ~~software subscription~~depreciation and maintenance expenses.

Non-interest expense ~~and online banking costs. Credit loss expense~~totaled $134.0 million for the six months ended June 30, 2023, an increase of $8.2 million, compared to $125.7 million for the six months ended June 30, 2022. The Company recorded a $92,000 provision for credit losses for off-balance sheet credit exposures ~~increased $595,000 to $1.6 million~~ for the ~~three~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to a ~~$980,000~~$3.4 million negative provision for the same period in ~~2021.~~2022. The $3.5 million increase in the provision for credit losses for off-balance sheet credit exposures was primarily the result of the period-over-period relative change in line of credit utilization and an increase in projected loss ~~factors.~~factors as a result of a worsened economic forecast. Merger-related expenses totaled $3.1 million for the six months ended June 30, 2023, as a result of transaction costs related to our pending combination with Lakeland. Other operating expense increased $1.8 million to $21.0 million for the six months ended June 30, 2023, compared to $19.2 million for the six months ended June 30, 2022, primarily due to an increase in consulting fees and additional expenses related to foreclosed commercial real estate owned properties. FDIC insurance expense increased $1.5 million to $4.1 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to an increase in the assessment rate. Partially offsetting these increases, net occupancy expense decreased $1.5 million to $16.4 million for the six months ended June 30, 2023, compared to the same period in 2022, mainly due to decreases in maintenance and depreciation expenses. Additionally, compensation and benefits expense ~~increased $525,000~~decreased $482,000 to ~~$38.1 million for three months ended September 30, 2022, compared to $37.6~~$74.0 million for the ~~same period in 2021. The increase was principally~~six months ended June 30, 2023, compared to $74.5 million for the six months ended June 30, 2022, primarily due to ~~increases~~decreases in ~~salary expense~~the accrual for incentive and stock-based compensation, partially offset by a decrease in the accrual for incentive compensation. Net occupancy expenses increased $502,000 to $8.5 million for the three months ended September 30, 2022, compared to the same period in 2021, largely due to increases in maintenance, depreciation and rent expenses.

Non-interest expense totaled $195.2 million for the nine months ended September 30, 2022, an increase of $7.2 million, compared to $188.0 million for the nine months ended September 30, 2021. Compensation and benefits expense increased $4.8 million to $112.6 million for the nine months ended September 30, 2022, compared to $107.7 million for the nine months ended September 30, 2021, primarily due to increases in stock-based compensation and salary expense, partially offset by a decreases in the accrual for incentive compensation and post-retirement benefit expenses. Other operating expense increased $3.3 million to $31.4 million for the nine months ended September 30, 2022, compared to $28.0 million for the nine months ended September 30, 2021, primarily due to $2.9 million of transaction costs related to the recently announced pending merger with Lakeland and valuation charges on foreclosed real estate. Data processing expense increased $1.9 million to $16.6 million for the nine months ended September 30, 2022, mainly due to an increase in software subscription expenses. Additionally, net occupancy expense increased $1.1 million to $26.3 million for the nine months ended September 30, 2022, compared to the same period in 2021, mainly due to increases in rent, depreciation and maintenance expenses. Partially offsetting these increases, credit loss expense for off-balance sheet credit exposures decreased $3.9 million to a negative provision of $1.8 million for the nine months ended September 30, 2022, compared to a $2.2 million provision for the same period last year. The decrease was primarily the result of a decrease in the pipeline of loans approved and awaiting closing and an increase in line of credit utilization, partially offset by an increase in projected loss factors.salary expense.

Income Tax Expense. For the three months ended ~~September~~June 30, ~~2022,~~2023, the ~~Company’s~~Company's income tax expense was ~~$16.7~~$11.6 million with an effective tax rate of ~~27.7%~~26.7%, compared with ~~income tax expense of $12.9~~$14.3 million with an effective tax rate of ~~25.7%~~26.8% for the three months ended ~~September~~June 30, ~~2021.~~2022. The ~~increase~~decrease in tax expense for the three months ended ~~September~~June 30, ~~2022,~~2023, compared with the same period last year was largely the result of a decrease in taxable income, while the decrease in the effective tax rate for the three months ended June 30, 2023, compared with the three months ended June 30, 2022, was largely due to a decrease in the proportion of income derived from taxable sources.

For the six months ended June 30, 2023, the Company's income tax expense was $26.1 million with an ~~increase~~effective tax rate of 26.4%, compared with $29.6 million with an effective tax rate of 26.2% for the six months ended June 30, 2022. The decrease in tax expense for the six months ended June 30, 2023, compared with the same period last year was largely the result of a decrease in taxable income, while the increase in the effective tax rate for the ~~three~~six months ended ~~September~~June 30, ~~2022,~~2023, compared with the ~~three months ended September 30, 2021,~~prior year period was largely due to non-deductible merger related transaction costs ~~of $2.9 million~~ recognized in the current ~~quarter and an increase in the proportion of income derived from taxable sources.~~

For the nine months ended September 30, 2022, the Company's income tax expense was $46.2 million with an effective tax rate of 26.7%, compared with $44.4 million with an effective tax rate of 25.4% for the nine months ended September 30, 2021. The increase in tax expense for the nine months ended September 30, 2022, compared with the same period last year, was largely the result of an increase in taxable income, while the increase in the effective tax rate for the nine months ended September 30, 2022, compared with the prior year was largely due to non-deductible merger related transaction costs of $2.9 million recognized in the current period and an increasepartially offset by a decrease in the proportion of income derived from taxable sources.


Item 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Qualitative Analysis. Interest rate risk is the exposure of a bank’s current and future earnings and capital arising from adverse movements in interest rates. The guidelines of the Company’s interest rate risk policy seek to limit the exposure to changes in

interest rates that affect the underlying economic value of assets and liabilities, earnings and capital. To minimize interest rate risk, the Company generally sells all 20- and 30-year fixed-rate residential mortgage loans at origination. The Company retains residential fixed rate mortgages with terms of 15 years or less and biweekly payment residential mortgages with a term of 30 years or less. Commercial real estate loans generally have interest rates that reset in five years, and other commercial loans such as construction loans and commercial lines of credit reset with changes in the Prime rate, the Federal Funds rate, LIBOR or ~~LIBOR.~~

SOFR. Investment securities purchases generally have maturities of five years or less, and mortgage-backed securities have weighted average lives between three and five years.

The Asset/Liability Committee meets at least monthly, or as needed, to review the impact of interest rate changes on net interest income, net interest margin, net income and the economic value of equity. The Asset/Liability Committee reviews a variety of strategies that project changes in asset or liability mix and the impact of those changes on projected net interest income and net income.

The Company’s strategy for liabilities has been to maintain a stable core-funding base by focusing on core deposit account acquisition and increasing products and services per household. The Company’s ability to retain maturing time deposit accounts is the result of its strategy to remain competitively priced within its marketplace. The Company’s pricing strategy may vary depending upon current funding needs and the ability of the Company to fund operations through alternative sources, primarily by accessing short-term lines of credit with the FHLBNY during periods of pricing dislocation.

Quantitative Analysis. Current and future sensitivity to changes in interest rates are measured through the use of balance sheet and income simulation models. The analysis captures changes in net interest income using flat rates as a base, a most likely rate forecast and rising and declining interest rate forecasts. Changes in net interest income and net income for the forecast period, generally twelve to twenty-four months, are measured and compared to policy limits for acceptable change. The Company periodically reviews historical deposit re-pricing activity and makes modifications to certain assumptions used in its income simulation model regarding the interest rate sensitivity of deposits without maturity dates. These modifications are made to more closely reflect the most likely results under the various interest rate change scenarios. Since it is inherently difficult to predict the sensitivity of ~~interest bearing~~interest-bearing deposits to changes in interest rates, the changes in net interest income due to changes in interest rates cannot be precisely predicted. There are a variety of reasons that may cause actual results to vary considerably from the predictions presented below which include, but are not limited to, the timing, magnitude, and frequency of changes in interest rates, interest rate spreads, prepayments, and actions taken in response to such changes.

Specific assumptions used in the simulation model include:

•Parallel yield curve shifts for market rates;

•Current asset and liability spreads to market interest rates are fixed;

•Traditional savings and interest-bearing demand accounts move at 10% of the rate ramp in either direction;

•Retail Money Market and Business Money Market accounts move at 25% and 75% of the rate ramp in either direction respectively, subject to certain interest rate floors; and

•Higher-balance demand deposit tiers and promotional demand accounts move at 50% to 75% of the rate ramp in either direction, subject to certain interest rate floors.

The following table sets forth the results of a twelve-month net interest income projection model as of ~~September~~June 30, ~~2022~~2023 (dollars in thousands):


Change in interest rates (basis points) - Rate Ramp	Change in interest rates (basis points) - Rate Ramp	Net Interest Income						Change in interest rates (basis points) - Rate Ramp	Net Interest Income
		Dollar Amount		Dollar Change		Percent Change			Dollar Amount		Dollar Change		Percent Change
-200								-200	$	401,744	$	(3,242)	(0.8)	%
-100	-100	$	459,444	$	(5,259)	(1.1)	%	-100	403,524		(1,462)		(0.4)
Static	Static	464,703		—		—		Static	404,986		—		—
+100	+100	469,235		4,532		1.0		+100	406,166		1,180		0.3
+200	+200	473,394		8,691		1.9		+200	406,954		1,968		0.5
+300		477,425		12,722		2.7

The interest rate risk position of the Company remains ~~moderately asset-sensitive notwithstanding the deployment of excess cash into fixed rate longer duration assets, including investment securities and loans.~~fairly neutral. As a result, the preceding table indicates that, as of ~~September~~June 30, ~~2022,~~2023, in the event of a ~~300~~200 basis point increase in interest rates, whereby rates ramp up evenly over a twelve-month period, net interest income would increase ~~2.7%~~0.5%, or ~~$12.7~~$2.0 million. In the event of a ~~100~~200 basis point decrease in interest rates, whereby rates ramp downward evenly over a twelve-month period, net interest income would decrease ~~1.1%~~0.8%, or ~~$5.3~~$3.2 million over the same period. In this downward rate scenario, rates on deposits have a repricing floor of zero.

Another measure of interest rate sensitivity is to model changes in economic value of equity through the use of immediate and sustained interest rate shocks. The following table illustrates the result of the economic value of equity model as of

~~September~~ June 30, ~~2022~~2023 (dollars in thousands):


		Present Value of Equity						Present Value of Equity as Percent of Present Value of Assets					Present Value of Equity						Present Value of Equity as Percent of Present Value of Assets
Change in interest rates (basis points)	Change in interest rates (basis points)	Dollar Amount		Dollar Change		Percent Change		Present Value Ratio		Percent Change		Change in interest rates (basis points)	Dollar Amount		Dollar Change		Percent Change		Present Value Ratio		Percent Change
-200												-200	$	1,752,473	$	(59,795)	(3.3)	%	12.3	%	(8.0)	%
-100	-100	$	2,262,024	$	(10,705)	(0.5)	%	16.3	%	(3.2)	%	-100	1,794,579		(17,689)		(1.0)		12.9		(3.4)
Flat	Flat	2,272,729		—		—		16.8		—		Flat	1,812,268		—		—		13.4		—
+100	+100	2,329,654		56,925		2.5		17.7		5.0		+100	1,821,117		8,849		0.5		13.8		3.0
+200	+200	2,353,262		80,533		3.5		18.3		8.7		+200	1,826,912		14,644		0.8		14.1		5.8
+300		2,374,576		101,847		4.5		18.9		12.3

The preceding table indicates that as of ~~September~~June 30, ~~2022,~~2023, in the event of an immediate and sustained ~~300~~200 basis point increase in interest rates, the present value of equity is projected to increase ~~4.5%~~0.8%, or ~~$101.8~~$14.6 million. If rates were to decrease ~~100~~200 basis points, the present value of equity would decrease ~~0.5%~~3.3%, or ~~$10.7~~$59.8 million.

Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes in net interest income requires the use of certain assumptions regarding prepayment and deposit decay rates, which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. While management believes such assumptions are reasonable, there can be no assurance that assumed prepayment rates and decay rates will approximate actual future loan prepayment and deposit withdrawal activity. Moreover, the net interest income table presented assumes that the composition of interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the net interest income table provides an indication of the Company’s interest rate risk exposure at a particular point in time, such measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on the Company’s net interest income and will differ from actual results.

5556


Item 4.			CONTROLS AND PROCEDURES.

Under the supervision and with the participation of management, including the Principal Executive Officer and the Principal Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) were evaluated at the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective.

PART II—OTHER INFORMATION


Item 1.			Legal Proceedings

The Company is involved in various legal actions and claims arising in the normal course of business. In the opinion of management, these legal actions and claims are not expected to have a material adverse impact on the Company’s financial condition.


Item 1A.			Risk Factors

The risk factors that were previously disclosed in the Company’s Annual Report on Form 10K for the year ended December 31, ~~2021, have been~~2022, were supplemented by the Company in its Form 10-Q for the quarter ended ~~September 30, 2022 as follows:~~

Regulatory approvals may not be received, may take longer than expected, or may impose conditions that are not presently anticipated or that could have an adverse effect on the combined company that results from the merger of the Company and Lakeland.

Before the merger of the Company and Lakeland (the “merger”) and the subsequent merger of Lakeland Bank with and into Provident Bank (the “bank merger”) may be completed, various approvals, consents and non-objections must be obtained from the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), the FDIC, the New Jersey Department of Banking and Insurance (the “NJDOBI”) and other regulatory authorities in the United States. In determining whether to grant these approvals, such regulatory authorities consider a variety of factors, including the regulatory standing of each company. These approvals could be delayed or not obtained at all, including due to an adverse development in either company’s regulatory standing or in any other factors considered by regulators when granting such approvals; governmental, political or community group inquiries, investigations or opposition; or changes in legislation or the political environment generally.

The approvals that are granted may impose terms and conditions, limitations, obligations or costs, or place restrictions on the conduct of the combined company’s business or require changes to the terms of the transactions contemplated by the merger agreement between the Company and Lakeland. There can be no assurance that regulators will not impose any such conditions, limitations, obligations or restrictions and that such conditions, limitations, obligations or restrictions will not have the effect of delaying the completion of any of the transactions contemplated by the merger agreement, imposing additional material costs on or materially limiting the revenues of the combined company following the merger or otherwise reducing the anticipated benefits of the merger if the merger were consummated successfully within the expected timeframe. In addition, there can be no assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the merger. Additionally, the completion of the merger is conditioned on the absence of certain orders, injunctions or decrees by any court or regulatory agency of competent jurisdiction that would prohibit or make illegal the completion of any of the transactions contemplated by the merger agreement.

In addition, despite the companies’ commitments to using their reasonable best efforts to comply with conditions imposed by regulators, under the terms of the merger agreement, neither the Company nor Lakeland, nor any of their respective subsidiaries, is permitted (without the written consent of the other party), to take any action, or commit to take any action, or agree to any condition or restriction, in connection with obtaining the required permits, consents, approvals and authorizations of governmental entities that would reasonably be expected to have a material adverse effect on the combined company and its subsidiaries, taken as a whole, after giving effect to the merger and the bank merger.

~~Failure to complete the merger could negatively impact the Company.~~

If the merger is not completed for any reason, including as a result of the Company’s stockholders or Lakeland’s shareholders failing to approve certain matters in connection with the merger at each company’s respective special meeting, there may be various adverse consequences and the Company may experience negative reactions from the financial markets and from its customers and employees. For example, the Company’s business may have been impacted adversely by the failure to pursue

other beneficial opportunities due to the focus of management on the merger, without realizing any of the anticipated benefits of completing the merger. Additionally, if the merger agreement is terminated, the market price of the Company’s common stock could decline to the extent that current market prices reflect a market assumption that the merger will be beneficial and will be completed. The Company also could be subject to litigation related to any failure to complete the merger or to proceedings commenced against the Company to perform its obligations under the merger agreement. If the merger agreement is terminated under certain circumstances, the Company may be required to pay a termination fee of $50 million to Lakeland.

Additionally, the Company has incurred and will incur substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement, as well as the costs and expenses of preparing, filing, printing and mailing of a joint proxy statement/prospectus in connection with the merger, and all filing and other fees paid in connection with the merger. If the merger is not completed, the Company would have to pay these expenses without realizing the expected benefits of the merger.

~~The current volatile interest rate environment may adversely impact the fair value adjustments of investments and loans acquired in the merger.~~

Upon the closing of the merger, we will need to adjust the fair value of Lakeland’s investment and loan portfolios. The rising interest rate environment could have the effect of increasing the magnitude of the purchase accounting marks relating to such fair value adjustments, thereby increasing initial tangible book value dilution, extending the tangible book value earn back period, and negatively impacting the Company’s capital ratios, which may result in the Company taking steps to strengthen its capital position.

~~Combining the Company and Lakeland may be more difficult, costly or time-consuming than expected, and the Company may fail to realize the anticipated benefits of the merger.~~

The success of the merger will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of the Company and Lakeland. To realize the anticipated benefits and cost savings from the merger, the Company and Lakeland must successfully integrate and combine their businesses in a manner that permits those cost savings to be realized without adversely affecting current revenues and future growth. If the Company and Lakeland are not able to successfully achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings of the merger could be less than anticipated, and integration may result in additional and unforeseen expenses.

An inability to realize the full extent of the anticipated benefits of the merger and the other transactions contemplated by the merger agreement, as well as any delays encountered in the integration process, could have an adverse effect upon the revenues, levels of expenses and operating results of the combined company following the completion of the merger, which may adversely affect the value of the common stock of the combined company following the completion of the merger.

The Company and Lakeland have operated and, until the completion of the merger, must continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the companies’ ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits and cost savings of the merger. Integration efforts between the companies may also divert management attention and resources. These integration matters could have an adverse effect on the Company during this transition period and for an undetermined period after completion of the merger on the combined company.

Furthermore, the board of directors and executive leadership of the combined company will consist of former directors and executive officers from each of the Company and Lakeland. Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and philosophies.

~~The combined company may be unable to retain personnel of the Company and/or Lakeland successfully after the merger is completed.~~

The success of the merger will depend in part on the combined company’s ability to retain the talent and dedication of key employees currently employed by the Company and Lakeland. It is possible that these employees may decide not to remain with the Company or Lakeland, as applicable, while the merger is pending or with the combined company after the merger is consummated. If the Company and Lakeland are unable to retain key employees, including management, who are critical to the successful integration and future operations of the companies, the Company and Lakeland could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment costs. In addition, following the merger, if key employees terminate their employment, the combined company’s business

activities may be adversely affected, and management’s attention may be diverted from successfully hiring suitable replacements, all of which may cause the combined company’s business to suffer. The Company and Lakeland also may not be able to locate or retain suitable replacements for any key employees who leave either company.

~~The Company will be subject to business uncertainties and contractual restrictions while the merger is pending.~~

Uncertainty about the effect of the merger on employees and customers may have an adverse effect on the Company. These uncertainties may impair the Company’s ability to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with the Company to seek to change existing business relationships with the Company. In addition, subject to certain exceptions, the Company has agreed to operate its business in the ordinary course in all material respects and to refrain from taking certain actions that may adversely affect its ability to consummate the transactions contemplated by the merger agreement on a timely basis without the consent of Lakeland. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the completion of the merger.

~~The Company has incurred and is expected to incur substantial costs related to the merger and integration.~~

The Company has incurred and expects to incur a number of non-recurring costs associated with the merger. These costs include legal, financial advisory, accounting, consulting and other advisory fees, retention, severance and employee benefit-related costs, public company filing fees and other regulatory fees, financial printing and other printing costs, closing, integration and other related costs. Some of these costs are payable by the Company regardless of whether or not the merger is completed.

Stockholder litigation related to the merger could prevent or delay the completion of the merger, result in the payment of damages or otherwise negatively impact the business and operations of the Company.

Stockholders may bring claims in connection with the proposed merger and, among other remedies, may seek damages or an injunction preventing the merger from closing. If any plaintiff were successful in obtaining an injunction prohibiting the Company or Lakeland from completing the merger or any other transactions contemplated by the merger agreement, then such injunction may delay or prevent the effectiveness of the merger and could result in costs to the Company, including costs in connection with the defense or settlement of any stockholder lawsuits filed in connection with the merger. Further, such lawsuits and the defense or settlement of any such lawsuits may have an adverse effect on the financial condition and results of operations of the Company.

~~The COVID-19 pandemic may delay and adversely affect the completion of the merger.~~

The COVID-19 pandemic has created economic and financial disruptions that have adversely affected, and are likely to continue to adversely affect, the business, financial condition, liquidity, capital and results of operations of the Company. If the effects of the COVID-19 pandemic cause a continued or extended decline in the economic environment and the financial results of the Company, or the business operations of the Company are further disrupted as a result of the COVID-19 pandemic, efforts to complete the merger and integrate the businesses of the Company and Lakeland may also be delayed and adversely affected. Additional time may be required to obtain the requisite regulatory approvals, and regulators may impose additional requirements on the Company or Lakeland that must be satisfied prior to completion of the merger, which could delay and adversely affect the completion of the merger.

~~The merger agreement may be terminated in accordance with its terms and the merger may not be completed.~~

The merger agreement is subject to a number of conditions which must be fulfilled in order to complete the merger. Those conditions include, among other things: (i) approval by each of the Company’s stockholders and Lakeland’s shareholders of certain matters relating to the merger at each company’s respective special meeting; (ii) authorization for listing on the New York Stock Exchange of the shares of the Company’s common stock to be issued in the merger, subject to official notice of issuance, (iii) the receipt of required regulatory approvals, including the approval of the Federal Reserve Board, the FDIC and the NJDOBI; and (iv) the absence of any order, injunction, decree or other legal restraint preventing the completion of the merger, the bank merger or any of the other transactions contemplated by the merger agreement or making the completion of the merger, the bank merger or any of the other transactions contemplated by the merger agreement illegal. Each party’s obligation to complete the merger is also subject to certain additional customary conditions, including (a) subject to applicable materiality standards, the accuracy of the representations and warranties of the other party, (b) the performance in all material respects by the other party of its obligations under the merger agreement, (c) the receipt by each party of an opinion from its counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986 and (d) the execution and delivery of the bank merger agreement in respect of the bank merger.

These conditions to the closing may not be fulfilled in a timely manner or at all, and, accordingly, the merger may not be completed. In addition, the parties can mutually decide to terminate the merger agreement at any time, before or after the requisite stockholder and shareholder approvals, or the Company or Lakeland may elect to terminate the merger agreement in certain other circumstances.

March 31, 2023.


Item 2.			Unregistered Sales of Equity Securities, ~~and~~ Use of ~~Proceeds.~~Proceeds, and Issuer Purchases of Equity Securities.

ISSUER PURCHASES OF EQUITY SECURITIES
Period (a) Total Number of Shares
Purchased (b) Average
Price Paid per Share
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
(d) Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (1)
July 1, 2022 through July 31, 2022 351 $ 22.90 351 1,136,644
August 1, 2022 through August 31, 2022 1,938 23.99 1,938 1,134,706
September 1, 2022 through September 30, 2022 — — — 1,134,706
Total 2,289 23.82 2,289


Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	(d) Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (1)
April 1, 2023 through April 30, 2023	38	$	18.42	38	1,062,832
May 1, 2023 through May 31, 2023	208	15.15		208	1,062,624
June 1, 2023 through June 30, 2023	—	—		—	1,062,624
Total	246	15.66		246

(1) On December 28, 2021, the Company’s Board of Directors approved the purchase of up to 3,900,000 shares of its common stock under a ninth general repurchase program to commence upon completion of the eighth repurchase program. The repurchase program has no expiration date.


Item 3.			Defaults Upon Senior Securities.

Not Applicable


Item 4.			Mine Safety Disclosures

Not Applicable


Item 5.			Other Information.

~~None~~(a) During the three months ended June 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement," as that term is used in SEC regulations.

(b) The information below is reported in lieu of information that would be reported pursuant to a Current Report on Form 8-K filed with the Commission during the period under Item 5.02.

On August 2, 2023, Provident Financial Services, Inc. (the “Company”), Provident Bank (the “Bank”) and John Kuntz, Senior Executive Vice President, General Counsel and Corporate Secretary of the Company (the “Executive”), entered into a Transition Agreement with General Release of Claims (the “Transition Agreement”) in connection with the transaction

contemplated under the Agreement and Plan of Merger dated September 26, 2022 by and among the Company, NL 239 Corp. and Lakeland Bancorp, Inc. (the “Merger”) and related restructuring of the Company’s management team.

The Transition Agreement provides that the Executive’s employment with the Company and Bank will terminate as part of the management restructuring on the later of January 31, 2024 or 90 days after the closing date of the Merger (the “Separation Date”), unless (i) the Executive resigns his employment or dies prior to the Separation Date, or (ii) the Company or Bank terminates the Executive’s employment due to Disability (as defined in the Transition Agreement) or for Cause (as defined in the Transition Agreement) prior to the Separation Date (the Separation Date, or if applicable, Executive’s earlier termination date, is referred to as his “Termination Date”).

Pursuant to the Transition Agreement, as of the closing date of the merger (the “Transition Date”) and ending on the Termination Date, the Executive will serve as Special Advisor to the Company’s Chief Executive Offer in exchange for an annualized base salary of $550,000. In addition, unless the Executive dies, has his employment terminated due to Disability, resigns his employment or is terminated for Cause prior to the Separation Date, and in exchange for a release of claims, post-employment restrictions in favor of the Company and other valuable consideration, the Executive will receive a lump sum bonus payment of $875,000, less required withholding (the “Bonus”), in consideration of his contributions toward the successful integration of the pending Merger. If the Executive’s employment terminates for any reason prior to the closing date of the Merger, Executive shall not be entitled to the Bonus. If Executive dies or has his employment terminated due to Disability prior to the Separation Date, the Executive or his estate, as applicable, will receive a prorated amount of the Bonus.

Pursuant to the Transition Agreement, unless the Executive dies, has his employment terminated due to Disability, resigns his employment or is terminated for Cause prior to the Separation Date, and in exchange for a release of claims, post-employment restrictions in favor of the Company and other valuable consideration, the Executive will (i) receive a lump sum severance cash payment of $1,650,000, less required withholding (the “Severance”), and (ii) in accordance with the terms of the Company’s equity plan, the Executive’s continued service as a non-employee director of Beacon Trust Company shall entitle the Executive to continued vesting of all unvested and outstanding equity awards as of the Termination Date. If the Executive’s employment terminates for any reason prior to the closing date of the Merger, Executive shall not be entitled to the Severance.

This summary of the Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the text of the Agreement, included as Exhibit 10.1 to this filing.


Item 6.			Exhibits.

The following exhibits are filed herewith:


2.1			Agreement and Plan of Merger ~~dated March 11, 2020,~~ by and between Provident Financial Services, Inc. and ~~SB One Bancorp.~~Lakeland Bancorp, Inc. (Filed as ~~an exhibit~~Exhibit 2.1 to the Company's Current Report on Form 8-K ~~on March 12, 2020~~filed with the Securities and Exchange ~~Commission/Registration~~Commission on September 27, 2022/File No. ~~001-31566.~~001-31566)

3.1			Certificate of Incorporation of Provident Financial Services, Inc. (Filed as an exhibit to the Company’s Registration Statement on Form S-1, and any amendments thereto, with the Securities and Exchange Commission/Registration No. 333-98241.)

3.2			Amended and Restated Bylaws of Provident Financial Services, Inc. (Filed as an exhibit to the Company’s December 31, 2011 Annual Report to Stockholders on Form 10-K filed with the Securities and Exchange Commission on February 29, 2012/File No. 001-31566.)

4.1			Form of Common Stock Certificate of Provident Financial Services, Inc. (Filed as an exhibit to the Company’s Registration Statement on Form S-1, and any amendments thereto, with the Securities and Exchange Commission/Registration No. 333-98241.)

10.1			Transition Agreement with General Release of Claims by and between Provident Financial Services, Inc., Provident Bank and John Kuntz .

























31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32			Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101			The following financial statements from the Company’s Quarterly Report to Stockholders on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in iXBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.


101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH			XBRL Taxonomy Extension Schema Document

101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF			XBRL Taxonomy Extension Definition Linkbase Document

101.LAB			XBRL Taxonomy Extension Labels Linkbase Document

101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document

104			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, has been formatted in iXBRL.

6059

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PROVIDENT FINANCIAL SERVICES, INC.

Date:

~~November 9, 2022~~August 8, 2023

By:

/s/ Anthony J. Labozzetta

Anthony J. Labozzetta

President and Chief Executive Officer (Principal Executive Officer)

Date:

~~November 9, 2022~~August 8, 2023

By:

/s/ Thomas M. Lyons

Thomas M. Lyons

Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date:

~~November 9, 2022~~August 8, 2023

By:

/s/ ~~Frank S. Muzio~~Adriano M. Duarte

~~Frank S. Muzio~~Adriano M. Duarte

Executive Vice President and Chief Accounting Officer

6160


	For the nine months ended
	September 30, 2022					September 30, 2021
Troubled Debt Restructurings	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

Mortgage loans:
Residential	2	$	265	$	204	3	$	546	$	538

Multi-Family	1	1,618		1,583		—	—		—
Total mortgage loans	3	1,883		1,787		3	546		538
Commercial loans	2	378		273		4	2,940		2,318
Consumer loans	1	108		88		—	—		—
Total restructured loans	6	$	2,369	$	2,148	7	$	3,486	$	2,856


	September 30, 2022						December 31, 2021
	Unpaid Principal Balance		Recorded Investment	Related Allowance	Average Recorded Investment	Interest Income Recognized	Unpaid Principal Balance	Recorded Investment	Related Allowance	Average Recorded Investment	Interest Income Recognized
Loans with no related allowance
Mortgage loans:
Residential	$	10,047	7,755	—	8,134	281	12,326	9,814	—	9,999	423
Commercial	16,799		14,604	—	13,617	48	15,310	14,685	—	15,064	63
Multi-family	1,618		1,583	—	1,617	12	—	—	—	—	—
Construction	1,101		1,101	—	1,101	—	1,656	1,588	—	1,643	30
Total	29,565		25,043	—	24,469	341	29,292	26,087	—	26,706	516
Commercial loans	8,338		8,113	—	8,355	18	9,845	7,254	—	7,714	33
Consumer loans	1,310		760	—	880	38	1,389	853	—	1,613	115
Total impaired loans	$	39,213	33,916	—	33,704	397	40,526	34,194	—	36,033	664

Loans with an allowance recorded
Mortgage loans:
Residential	$	7,155	6,843	743	6,926	197	7,994	7,652	858	7,742	278
Commercial	19,143		19,143	2,134	19,162	35	871	871	17	894	48
Multi-family	—		—	—	—	—	—	—	—	—	—

Total	26,298		25,986	2,877	26,088	232	8,865	8,523	875	8,636	326
Commercial loans	6,163		5,452	1,275	8,651	87	9,498	9,166	3,358	8,304	257
Consumer loans	325		306	46	312	9	391	371	51	379	18
Total impaired loans	$	32,786	31,744	4,198	35,051	328	18,754	18,060	4,284	17,319	601

Total impaired loans
Mortgage loans:
Residential	$	17,202	14,598	743	15,060	478	20,320	17,466	858	17,741	701
Commercial	35,942		33,747	2,134	32,779	83	16,181	15,556	17	15,958	111
Multi-family	1,618		1,583	—	1,617	12	—	—	—	—	—
Construction	1,101		1,101	—	1,101	—	1,656	1,588	—	1,643	30
Total	55,863		51,029	2,877	50,557	573	38,157	34,610	875	35,342	842
Commercial loans	14,501		13,565	1,275	17,006	105	19,343	16,420	3,358	16,018	290
Consumer loans	1,635		1,066	46	1,192	47	1,780	1,224	51	1,992	133
Total impaired loans	$	71,999	65,660	4,198	68,755	725	59,280	52,254	4,284	53,352	1,265