PROVIDENT FINANCIAL SERVICES INC 10-Q

Item 1. FINANCIAL STATEMENTS. PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Financial Condition March 31, 2022 (Unaudited) and December 31, 2021 (Dollars in Thousands) March 31, 2022 December 31, 2021 ASSETS Cash and due from banks $ 330,814 $ 506,270 Short-term investments 102,332 206,193 Total cash and cash equivalents 433,146 712,463 Available for sale debt securities, at fair value 2,072,337 2,057,851 Held to maturity debt securities, net (fair value of $ 417,664 and $ 449,709 at March 31, 2022 and December 31, 2021, respectively). 421,958 436,150 Equity securities, at fair value 1,256 1,325 Federal Home Loan Bank stock 23,973 34,290 Loans 9,662,882 9,581,624 Less allowance for credit losses 76,275 80,740 Net loans 9,586,607 9,500,884 Foreclosed assets, net 8,578 8,731 Banking premises and equipment, net 82,987 80,559 Accrued interest receivable 41,033 41,990 Intangible assets 463,325 464,183 Bank-owned life insurance 237,808 236,630 Other assets 244,006 206,146 Total assets $ 13,617,014 $ 13,781,202 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits: Demand deposits $ 9,183,808 $ 9,080,956 Savings deposits 1,490,624 1,460,541 Certificates of deposit of $100,000 or more 391,321 368,277 Other time deposits 300,334 324,238 Total deposits 11,366,087 11,234,012 Mortgage escrow deposits 40,184 34,440 Borrowed funds 399,606 626,774 Subordinated debentures 10,336 10,283 Other liabilities 179,670 178,597 Total liabilities 11,995,883 12,084,106 Stockholders’ Equity: 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 75,881,889 shares outstanding at March 31, 2022, and 83,209,012 shares issued and 76,969,999 shares outstanding at December 31, 2021, respectively. 832 832 Additional paid-in capital 972,552 969,815 Retained earnings 839,807 814,533 Accumulated other comprehensive (loss) income ( 67,946 ) 6,863 Treasury stock ( 109,581 ) ( 79,603 ) Unallocated common stock held by the Employee Stock Ownership Plan ( 14,533 ) ( 15,344 ) Common stock acquired by the Directors' Deferred Fee Plan ("DDFP") ( 3,844 ) ( 3,984 ) Deferred Compensation - Directors' Deferred Fee Plan 3,844 3,984 Total stockholders’ equity 1,621,131 1,697,096 Total liabilities and stockholders’ equity $ 13,617,014 $ 13,781,202 See accompanying notes to unaudited consolidated financial statements. 3 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Income Three months ended March 31, 2022 and 2021 (Unaudited) (Dollars in Thousands, except per share data) Three months ended March 31, 2022 2021 Interest income: Real estate secured loans $ 63,835 $ 62,016 Commercial loans 22,821 26,143 Consumer loans 3,139 3,492 Available for sale debt securities, equity securities and Federal Home Loan Bank stock 7,951 5,612 Held to maturity debt securities 2,596 2,784 Deposits, Federal funds sold and other short-term investments 647 484 Total interest income 100,989 100,531 Interest expense: Deposits 5,187 7,417 Borrowed funds 1,168 2,809 Subordinated debt 108 305 Total interest expense 6,463 10,531 Net interest income 94,526 90,000 Provision benefit for credit losses ( 6,405 ) ( 15,001 ) Net interest income after provision for credit losses 100,931 105,001 Non-interest income: Fees 6,889 7,192 Wealth management income 7,466 7,134 Insurance agency income 3,420 2,727 Bank-owned life insurance 1,179 2,567 Net gains on securities transactions 16 197 Other income 1,178 1,820 Total non-interest income 20,148 21,637 Non-interest expense: Compensation and employee benefits 37,067 35,312 Net occupancy expense 9,330 9,301 Data processing expense 5,344 4,393 FDIC insurance 1,205 1,770 Amortization of intangibles 859 972 Advertising and promotion expense 1,104 877 Credit loss benefit for off-balance sheet credit exposures ( 2,390 ) ( 875 ) Other operating expenses 9,367 10,103 Total non-interest expense 61,886 61,853 Income before income tax expense 59,193 64,785 Income tax expense 15,231 16,226 Net income $ 43,962 $ 48,559 Basic earnings per share $ 0.58 $ 0.63 Weighted average basic shares outstanding 75,817,971 76,516,543 Diluted earnings per share $ 0.58 $ 0.63 Weighted average diluted shares outstanding 75,914,079 76,580,862 See accompanying notes to unaudited consolidated financial statements. 4 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Comprehensive Income Three months ended March 31, 2022 and 2021 (Unaudited) (Dollars in Thousands) Three months ended March 31, 2022 2021 Net income $ 43,962 $ 48,559 Other comprehensive (loss) income, net of tax: Unrealized gains and losses on available for sale debt securities: Net unrealized losses arising during the period ( 84,971 ) ( 9,019 ) Reclassification adjustment for gains included in net income — ( 171 ) Total ( 84,971 ) ( 9,190 ) Unrealized gains on derivatives 10,438 4,621 Amortization related to post-retirement obligations ( 276 ) ( 109 ) Total other comprehensive loss ( 74,809 ) ( 4,678 ) Total comprehensive (loss) income $ ( 30,847 ) $ 43,881 See accompanying notes to unaudited consolidated financial statements. 5 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Changes in Stockholders’ Equity For the three months ended March 31, 2021 (Unaudited) (Dollars in Thousands) For the three months ended March 31, 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 December 31, 2020 $ 832 $ 962,453 $ 718,090 $ 17,655 $ ( 59,018 ) $ ( 20,215 ) $ ( 4,549 ) $ 4,549 $ 1,619,797 Net income — — 48,559 — — — — — 48,559 Other comprehensive loss, net of tax — — — ( 4,678 ) — — — — ( 4,678 ) Cash dividends paid — — ( 18,075 ) — — — — — ( 18,075 ) Distributions from DDFP — 28 — — — — 168 ( 168 ) 28 Purchases of treasury stock — — — — ( 48 ) — — — ( 48 ) Purchase of employee restricted shares to fund statutory tax withholding — — — — ( 915 ) — — — ( 915 ) Shares issued dividend reinvestment plan — — — — — — — — — Stock option exercises — ( 82 ) — — 720 — — — 638 Allocation of ESOP shares — 145 — — — 768 — — 913 Allocation of Stock Award Plan ("SAP") shares — 959 — — — — — — 959 Allocation of stock options — 53 — — — — — — 53 Balance at March 31, 2021 $ 832 $ 963,556 $ 748,574 $ 12,977 $ ( 59,261 ) $ ( 19,447 ) $ ( 4,381 ) $ 4,381 $ 1,647,231 See accompanying notes to unaudited consolidated financial statements. PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Changes in Stockholders’ Equity For the three months ended March 31, 2022 (Unaudited) (Dollars in Thousands) For the three months ended March 31, 2022 COMMON STOCK 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 Net income — — 43,962 — — — — — 43,962 Other comprehensive loss, net of tax — — — ( 74,809 ) — — — — ( 74,809 ) Cash dividends paid — — ( 18,688 ) — — — — — ( 18,688 ) Distributions from DDFP — 45 — — — — 140 ( 140 ) 45 Purchases of treasury stock — — — — ( 29,025 ) — — — ( 29,025 ) Purchase of employee restricted shares to fund statutory tax withholding — — — — ( 953 ) — — — ( 953 ) Shares issued dividend reinvestment plan — — — — — — — — — Stock option exercises — — — — — — — — — Allocation of ESOP shares — 332 — — — 811 — — 1,143 Allocation of SAP shares — 2,311 — — — — — — 2,311 Allocation of stock options — 49 — — — — — — 49 Balance at March 31, 2022 $ 832 $ 972,552 $ 839,807 $ ( 67,946 ) $ ( 109,581 ) $ ( 14,533 ) $ ( 3,844 ) $ 3,844 $ 1,621,131 See accompanying notes to unaudited consolidated financial statements. 6 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows Three months ended March 31, 2022 and 2021 (Unaudited) (Dollars in Thousands) Three months ended March 31, 2022 2021 Cash flows from operating activities: Net income $ 43,962 $ 48,559 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of intangibles 3,247 3,264 Provision benefit for credit losses on loans and securities ( 6,405 ) ( 15,001 ) Credit loss benefit for off-balance sheet credit exposure ( 2,390 ) ( 875 ) Deferred tax expense 10,625 6,271 Amortization of operating lease right-of-use assets 2,807 2,812 Income on Bank-owned life insurance ( 1,179 ) ( 2,567 ) Net amortization of premiums and discounts on securities 3,844 3,110 Accretion of net deferred loan fees ( 2,438 ) ( 5,487 ) Amortization of premiums on purchased loans, net 71 190 Net increase in loans originated for sale — ( 14,492 ) Proceeds from sales of loans originated for sale — 15,260 Proceeds from sales and paydowns of foreclosed assets 200 569 ESOP expense 1,143 913 Allocation of stock award shares 2,311 959 Allocation of stock options 49 53 Net gain on sale of loans — ( 768 ) Net gain on securities transactions ( 16 ) ( 197 ) Net gain on sale of premises and equipment ( 8 ) ( 15 ) Net gain on sale of foreclosed assets — ( 170 ) Decrease (increase) in accrued interest receivable 957 ( 2,567 ) (Increase) decrease in other assets ( 6,718 ) 41,160 Increase (decrease) in other liabilities 1,073 ( 44,565 ) Net cash provided by operating activities 51,135 36,416 Cash flows from investing activities: Proceeds from maturities, calls and paydowns of held to maturity debt securities 16,694 10,236 Purchases of held to maturity debt securities ( 2,941 ) ( 7,541 ) Proceeds from sales of securities — 9,442 Proceeds from maturities and paydowns of available for sale debt securities 84,128 90,807 Purchases of available for sale debt securities ( 218,082 ) ( 226,417 ) Proceeds from redemption of Federal Home Loan Bank stock 10,317 12,147 Purchases of Federal Home Loan Bank stock — ( 1,656 ) Purchases of loans 2,610 — Net (increase) decrease in loans ( 76,328 ) 24,217 Proceeds from sales of premises and equipment 8 15 Purchases of premises and equipment ( 8,843 ) ( 1,846 ) Net cash used in investing activities ( 192,437 ) ( 90,596 ) Cash flows from financing activities: Net increase in deposits 132,075 459,684 Increase in mortgage escrow deposits 5,744 3,474 Cash dividends paid to stockholders ( 18,688 ) ( 18,075 ) Purchase of treasury stock $ ( 29,025 ) $ ( 48 ) 7 Three months ended March 31, 2022 2021 Purchase of employee restricted shares to fund statutory tax withholding ( 953 ) ( 915 ) Stock options exercised — 638 Proceeds from long-term borrowings — 400,000 Payments on long-term borrowings ( 229,111 ) ( 619,265 ) Net increase (decrease) in short-term borrowings 1,943 ( 16,096 ) Net cash (used in) provided by financing activities ( 138,015 ) 209,397 Net (decrease) increase in cash and cash equivalents ( 279,317 ) 155,217 Cash and cash equivalents at beginning of period 685,163 418,083 Restricted cash at beginning of period 27,300 114,270 Total cash, cash equivalents and restricted cash at beginning of period 712,463 532,353 Cash and cash equivalents at end of period 428,326 644,940 Restricted cash at end of period 4,820 42,630 Total cash, cash equivalents and restricted cash at end of period $ 433,146 $ 687,570 Cash paid during the period for: Interest on deposits and borrowings $ 7,084 $ 10,399 Income taxes $ 560 $ 270 Non-cash investing activities: Transfer of loans receivable to foreclosed assets $ 47 $ 434 See accompanying notes to unaudited consolidated financial statements. 8 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. and its wholly owned subsidiary, Provident Bank (the “Bank,” together with Provident Financial Services, Inc., the “Company”). 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 estimates that are particularly susceptible to 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 months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for all of 2022. 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. These unaudited consolidated financial statements should be read in conjunction with the December 31, 2021 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 months ended March 31, 2022 and 2021 (dollars in thousands, except per share amounts): Three months ended March 31, 2022 2021 Net Income Weighted Average Common Shares Outstanding Per Share Amount Net Income Weighted Average Common Shares Outstanding Per Share Amount Net income $ 43,962 $ 48,559 Basic earnings per share: Income available to common stockholders $ 43,962 75,817,971 $ 0.58 $ 48,559 76,516,543 $ 0.63 Dilutive shares 96,108 64,319 Diluted earnings per share: Income available to common stockholders $ 43,962 75,914,079 $ 0.58 $ 48,559 76,580,862 $ 0.63 Anti-dilutive stock options and awards at March 31, 2022 and 2021, totaling 971,452 shares and 1.2 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. For the three months ended March 31, 2022, the improved economic outlook and the resulting lower allowance requirements led to reductions to the provisions for credit losses and off-balance sheet credit exposures. See Note 3 to the Consolidated Financial Statements for more information on the allowance for credit losses on loans. 9 D. Goodwill Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets acquired through 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 annual goodwill impairment test as of July 1, 2021. As of March 31, 2022, it is not more likely than not that the fair value of Provident Financial Services, Inc., the reporting unit, is below its carrying amount and therefore a test for impairment between annual tests is not required at this time. Note 2. Investment Securities At March 31, 2022, the Company had $ 2.07 billion and $ 422.0 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, 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 March 31, 2022 totaled 489 , compared with 166 at December 31, 2021. The increase in the number of securities in an unrealized loss position at March 31, 2022 was due to higher current market interest rates compared to rates at December 31, 2021. 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 ratings from the rating agencies at March 31, 2022 and the Company had one security rated BBB by Moody’s Investors Service. 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 March 31, 2022 and December 31, 2021 (in thousands): March 31, 2022 Amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. Treasury obligations $ 274,876 — ( 14,711 ) 260,165 Mortgage-backed securities 1,767,392 1,132 ( 98,060 ) 1,670,464 Asset-backed securities 43,895 1,139 ( 98 ) 44,936 State and municipal obligations 68,453 31 ( 4,638 ) 63,846 Corporate obligations 34,088 239 ( 1,401 ) 32,926 $ 2,188,704 2,541 ( 118,908 ) 2,072,337 10 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 March 31, 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. March 31, 2022 Amortized cost Fair value Due in one year or less $ 997 1,005 Due after one year through five years 137,234 130,466 Due after five years through ten years 174,136 164,946 Due after ten years 65,050 60,520 $ 377,417 356,937 Investments which pay principal on a periodic basis totaling $ 1.81 billion at amortized cost and $ 1.72 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. For the three months ended March 31, 2022, no securities were sold or called from the available for sale debt securities portfolio. For the three months ended March 31, 2021, proceeds from calls on securities in the available for sale debt securities portfolio totaled $ 9.4 million, with gains of $ 230,000 and no loss recognized. The following tables present the fair values and gross unrealized losses for available for sale debt securities in an unrealized loss position at March 31, 2022 and December 31, 2021 (in thousands): March 31, 2022 Less than 12 months 12 months or longer Total Fair value Gross unrealized losses Fair value Gross unrealized losses Fair value Gross unrealized losses U.S. Treasury obligations $ 260,165 ( 14,711 ) — — 260,165 ( 14,711 ) Mortgage-backed securities 1,352,508 ( 84,395 ) 155,913 ( 13,665 ) 1,508,422 ( 98,060 ) Asset-backed securities 1,810 ( 98 ) — — 1,810 ( 98 ) State and municipal obligations 60,024 ( 4,638 ) — — 60,024 ( 4,638 ) Corporate obligations 14,270 ( 730 ) 6,124 ( 671 ) 20,394 ( 1,401 ) $ 1,688,777 ( 104,572 ) 162,037 ( 14,336 ) 1,850,815 ( 118,908 ) 11 December 31, 2021 Less than 12 months 12 months or longer Total Fair value Gross unrealized losses Fair value Gross unrealized losses Fair value Gross unrealized losses U.S. Treasury obligations $ 98,621 ( 866 ) — — 98,621 ( 866 ) Mortgage-backed securities 1,147,403 ( 15,176 ) 33,850 ( 1,387 ) 1,181,253 ( 16,563 ) Asset-backed securities 1,930 ( 5 ) — — 1,930 ( 5 ) State and municipal obligations 10,732 ( 122 ) — — 10,732 ( 122 ) Corporate obligations 18,474 ( 347 ) — — 18,474 ( 347 ) $ 1,277,160 ( 16,516 ) 33,850 ( 1,387 ) 1,311,010 ( 17,903 ) The number of available for sale debt securities in an unrealized loss position at March 31, 2022 totaled 309 , compared with 113 at December 31, 2021. The increase in the number of securities in an unrealized loss position at March 31, 2022 was due to higher current market interest rates compared to rates at December 31, 2021. At March 31, 2022, there were three private label mortgage-backed securities in an unrealized loss position, with an amortized cost of $ 3.4 million and an unrealized loss of $ 212,000 . These private-label mortgage-backed securities were investment grade at March 31, 2022. 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 March 31, 2022 and December 31, 2021 (in thousands): March 31, 2022 Amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. Treasury obligations $ 1,430 — — 1,430 Agency obligations 9,997 — ( 622 ) 9,375 Mortgage-backed securities 13 — — 13 State and municipal obligations 400,629 3,411 ( 6,625 ) 397,415 Corporate obligations 9,923 1 ( 493 ) 9,431 $ 421,992 3,412 ( 7,740 ) 417,664 At March 31, 2022, the allowance for credit losses on held to maturity debt securities totaled $ 34,000 and is excluded from amortized cost in the table above. 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 months ended March 31, 2022 and 2021. For the three months ended March 31, 2022, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $ 15.8 million with gross gains of $ 16,000 and no gross losses. For the three months ended March 31, 2021, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $ 6.8 million with gross losses of $ 33,000 and no gross gains. 12 The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio at March 31, 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. March 31, 2022 Amortized cost Fair value Due in one year or less $ 17,286 17,338 Due after one year through five years 153,590 152,915 Due after five years through ten years 194,905 194,739 Due after ten years 56,198 52,659 $ 421,979 417,651 Mortgage-backed securities totaling $ 13,000 at amortized cost and $ 13,000 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. Additionally, the allowance for credit losses totaling $ 34,000 is excluded from the table above. The following tables present the fair values and gross unrealized losses for held to maturity debt securities in an unrealized loss position at March 31, 2022 and December 31, 2021 (in thousands): March 31, 2022 Unrealized Losses Less than 12 months 12 months or longer Total Fair value Gross unrealized losses Fair value Gross unrealized losses Fair value Gross unrealized losses Agency obligations $ 9,374 ( 622 ) — — 9,374 ( 622 ) State and municipal obligations 90,209 ( 5,480 ) 8,482 ( 1,145 ) 98,691 ( 6,625 ) Corporate obligations 8,105 ( 493 ) — — 8,105 ( 493 ) $ 107,688 ( 6,595 ) 8,482 ( 1,145 ) 116,170 ( 7,740 ) December 31, 2021 Unrealized Losses Less than 12 months 12 months or longer Total Fair value Gross unrealized losses Fair value Gross unrealized losses Fair value Gross unrealized losses Agency obligations $ 9,821 ( 175 ) — — 9,821 ( 175 ) State and municipal obligations 27,350 ( 471 ) 5,022 ( 164 ) 32,372 ( 635 ) Corporate obligations 7,649 ( 152 ) — — 7,649 ( 152 ) $ 44,820 ( 798 ) 5,022 ( 164 ) 49,842 ( 962 ) The number of held to maturity debt securities in an unrealized loss position at March 31, 2022 totaled 180 , compared with 53 at December 31, 2021. The increase in the number of securities in an unrealized loss position at March 31, 2022, was due to higher current market interest rates compared to rates at December 31, 2021. 13 Credit Quality Indicators. The following table provides the amortized cost of held to maturity debt securities by credit rating as of March 31, 2022 (in thousands): March 31, 2022 Total Portfolio AAA AA A BBB Not Rated Total Treasury Obligations $ 1,430 — — — — 1,430 Agency obligations 9,997 — — — — 9,997 Mortgage-backed securities 13 — — — — 13 State and municipal obligations 53,191 305,861 39,664 945 968 400,629 Corporate obligations 509 2,124 7,265 — 25 9,923 $ 65,140 307,985 46,929 945 993 421,992 December 31, 2021 Total Portfolio AAA AA A BBB Not Rated Total Agency obligations $ 9,996 — — — — 9,996 Mortgage-backed securities 21 — — — — 21 State and municipal obligations 54,583 314,396 44,392 945 1,408 415,724 Corporate obligations 510 2,634 7,279 — 25 10,448 $ 65,110 317,030 51,671 945 1,433 436,189 Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. At March 31, 2022, the held to maturity debt securities portfolio was comprised of 15 % rated AAA, 73 % rated AA, 11 % 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. At March 31, 2022, the allowance for credit losses on held to maturity debt securities was $ 34,000 , a decrease from $ 39,000 at December 31, 2021. Note 3. Loans Receivable and Allowance for Credit Losses Loans receivable at March 31, 2022 and December 31, 2021 are summarized as follows (in thousands): March 31, 2022 December 31, 2021 Mortgage loans: Residential $ 1,194,613 1,202,638 Commercial 3,937,216 3,827,370 Multi-family 1,394,761 1,364,397 Construction 699,415 683,166 Total mortgage loans 7,226,005 7,077,571 Commercial loans 2,131,326 2,188,866 Consumer loans 316,589 327,442 Total gross loans 9,673,920 9,593,879 Premiums on purchased loans 1,482 1,451 Net deferred fees and unearned discounts ( 12,520 ) ( 13,706 ) Total loans $ 9,662,882 9,581,624 The following tables summarize the aging of loans receivable by portfolio segment and class of loans (in thousands): 14 March 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 specific allowance Mortgage loans: Residential $ 2,385 1,354 5,396 — 9,135 1,185,478 1,194,613 5,396 Commercial 282 — 19,533 — 19,815 3,917,401 3,937,216 19,533 Multi-family 816 — 2,053 — 2,869 1,391,892 1,394,761 2,053 Construction 1,659 — 2,366 — 4,025 695,390 699,415 2,366 Total mortgage loans 5,142 1,354 29,348 — 35,844 7,190,161 7,226,005 29,348 Commercial loans 4,019 318 13,793 — 18,130 2,113,196 2,131,326 10,366 Consumer loans 571 90 1,171 — 1,832 314,757 316,589 1,171 Total gross loans $ 9,732 1,762 44,312 — 55,806 9,618,114 9,673,920 40,885 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 specific 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 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 $ 44.3 million and $ 48.0 million at March 31, 2022 and December 31, 2021, respectively. Included in non-accrual loans were $ 20.3 million and $ 23.0 million of loans which were less than 90 days past due at March 31, 2022 and December 31, 2021, respectively. There were no loans 90 days or greater past due and still accruing interest at March 31, 2022 and December 31, 2021. Generally, accrued interest is written off by reversing interest income during the quarter the loan is moved from an accrual to a non-accrual status. The Company defines an impaired loan 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 loans also include all loans modified as troubled debt restructurings (“TDRs”). An allowance 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. 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. 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. 15 At March 31, 2022, there were 134 impaired loans totaling $ 48.3 million. Included in this total were 105 TDRs related to 102 borrowers totaling $ 20.3 million that were performing in accordance with their restructured terms and which continued to accrue interest at March 31, 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 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 March 31, 2022 and December 31, 2021, the fair value of the assets securing collateral-dependent impaired loans totaled $ 16.2 million and $ 18.2 million, respectively. These collateral-dependent impaired loans at March 31, 2022 consisted of $ 14.4 million in commercial loans, $ 1.7 million in residential real estate loans, and $ 64,000 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 months ended March 31, 2022 and 2021 was as follows (in thousands): Three months ended March 31, Mortgage loans Commercial loans Consumer loans Total 2022 Balance at beginning of period $ 52,104 26,343 2,293 80,740 Provision benefit to operations ( 1,995 ) ( 4,404 ) ( 1 ) ( 6,400 ) Recoveries of loans previously charged-off 10 1,860 166 2,036 Loans charged-off ( 23 ) — ( 78 ) ( 101 ) Balance at end of period $ 50,096 23,799 2,380 76,275 2021 Balance at beginning of period $ 68,307 27,084 6,075 101,466 Provision benefit to operations ( 13,467 ) ( 467 ) ( 1,066 ) ( 15,000 ) Recoveries of loans previously charged-off 276 528 303 1,107 Loans charged-off ( 918 ) ( 843 ) ( 221 ) ( 1,982 ) Balance at end of period $ 54,198 26,302 5,091 85,591 For the three months ended March 31, 2022, the Company recorded a $ 6.4 million provision benefit for credit losses on loans, compared to a $ 15.0 million provision benefit for the same period in 2021. The decrease in the period-over-period provision benefit was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period. The following tables summarize loans receivable by portfolio segment and impairment method (in thousands): March 31, 2022 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Individually evaluated for impairment $ 37,976 9,147 1,200 48,323 Collectively evaluated for impairment 7,188,029 2,122,179 315,389 9,625,597 Total gross loans $ 7,226,005 2,131,326 316,589 9,673,920 December 31, 2021 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Individually evaluated for impairment $ 34,610 16,420 1,224 52,254 Collectively evaluated for impairment 7,042,961 2,172,446 326,218 9,541,625 Total gross loans $ 7,077,571 2,188,866 327,442 9,593,879 16 The allowance for credit losses is summarized by portfolio segment and impairment classification as follows (in thousands): March 31, 2022 Mortgage loans Commercial loans Consumer loans Total Individually evaluated for impairment $ 840 1,145 49 2,034 Collectively evaluated for impairment 49,256 22,654 2,331 74,241 Total gross loans $ 50,096 23,799 2,380 76,275 December 31, 2021 Mortgage loans Commercial loans Consumer loans Total Individually evaluated for impairment $ 875 3,358 51 4,284 Collectively evaluated for impairment 51,229 22,985 2,242 76,456 Total gross loans $ 52,104 26,343 2,293 80,740 Loan modifications for borrowers experiencing financial difficulties that are considered TDRs primarily involve lowering the monthly payments on such loans through either a reduction in 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 of principal or accrued interest. 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 the number of loans modified as TDRs during the three months ended March 31, 2022 and 2021, along with their balances immediately prior to the modification date and post-modification as of March 31, 2022 and 2021 (in thousands): For the three months ended March 31, 2022 March 31, 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: Commercial loans — — — 3 1,361 1,359 Total restructured loans — $ — $ — 3 $ 1,361 $ 1,359 All TDRs are impaired loans, which are individually evaluated for impairment. During the three months ended March 31, 2022, no charge-offs were recorded on collateral-dependent impaired loans, while $ 1.5 million of charge-offs were recorded on collateral-dependent impaired loans during the three months ended March 31, 2021. For the three months ended March 31, 2022, there was no allowance for credit losses for loans associated with the TDRs presented in the preceding tables. There were no loans which had a payment default (90 days or more past due) for loans modified as TDRs within the 12 month periods ending March 31, 2022 and March 31, 2021. For TDRs that subsequently default, the Company determines 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 March 31, 2022, the balance of PCD loans totaled $ 242.7 million with a related allowance for credit losses of $ 2.8 million. The balance of PCD loans at December 31, 2021 was $ 246.9 million with a related allowance for credit losses of $ 2.8 million. 17 The following table presents loans individually evaluated for impairment by class and loan category (in thousands): March 31, 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 $ 11,064 8,680 — 8,723 95 12,326 9,814 — 9,999 423 Commercial 18,381 17,648 — 17,723 14 15,310 14,685 — 15,064 63 Multi-family 1,614 1,614 — 1,620 — — — — — — Construction 1,656 1,588 — 1,588 — 1,656 1,588 — 1,643 30 Total 32,715 29,530 — 29,654 109 29,292 26,087 — 26,706 516 Commercial loans 5,670 3,645 — 3,680 4 9,845 7,254 — 7,714 33 Consumer loans 1,425 889 — 898 14 1,389 853 — 1,613 115 Total impaired loans $ 39,810 34,064 — 34,232 127 40,526 34,194 — 36,033 664 Loans with an allowance recorded Mortgage loans: Residential $ 7,925 7,584 824 7,617 72 7,994 7,652 858 7,742 278 Commercial 862 862 16 867 12 871 871 17 894 48 Total 8,787 8,446 840 8,484 84 8,865 8,523 875 8,636 326 Commercial loans 6,152 5,502 1,145 8,546 34 9,498 9,166 3,358 8,304 257 Consumer loans 331 311 49 313 3 391 371 51 379 18 Total impaired loans $ 15,270 14,259 2,034 17,343 121 18,754 18,060 4,284 17,319 601 Total impaired loans Mortgage loans: Residential $ 18,989 16,264 824 16,340 167 20,320 17,466 858 17,741 701 Commercial 19,243 18,510 16 18,590 26 16,181 15,556 17 15,958 111 Multi-family 1,614 1,614 — 1,620 — — — — — — Construction 1,656 1,588 — 1,588 — 1,656 1,588 — 1,643 30 Total 41,502 37,976 840 38,138 193 38,157 34,610 875 35,342 842 Commercial loans 11,822 9,147 1,145 12,226 38 19,343 16,420 3,358 16,018 290 Consumer loans 1,756 1,200 49 1,211 17 1,780 1,224 51 1,992 133 Total impaired loans $ 55,080 48,323 2,034 51,575 248 59,280 52,254 4,284 53,352 1,265 Specific allocations of the allowance for credit losses attributable to impaired loans totaled $ 2.0 million at March 31, 2022 and $ 4.3 million at December 31, 2021. At March 31, 2022 and December 31, 2021, impaired loans for which there was no related allowance for credit losses totaled $ 34.1 million and $ 34.2 million, respectively. The average balance of impaired loans for the three months ended March 31, 2022 and the twelve months ended December 31, 2021 was $ 51.6 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. 18 The Company participated in the Paycheck Protection Program (“PPP”) through the United States Department of the Treasury and Small Business Administration ("SBA"). The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are 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 met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. As of March 31, 2022, the Company secured 2,067 PPP loans for its customers totaling $ 682.0 million, which includes both the initial round and the second round of PPP. As of March 31, 2022, 1,994 PPP loans totaling $ 653.1 million were forgiven and repaid by the SBA. At March 31, 2022, PPP loans totaled $ 28.9 million, and are included in the commercial loan portfolio. The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades as of March 31, 2022 and December 31, 2021 (in thousands): Gross Loans Held for Investment by Year of Origination at March 31, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Residential Special mention $ — — — — — 1,354 — — 1,354 Substandard — — — — 280 7,718 — — 7,998 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — 280 9,072 — — 9,352 Pass/Watch 45,614 225,105 228,755 109,721 62,727 513,339 — — 1,185,261 Total residential $ 45,614 225,105 228,755 109,721 63,007 522,411 — — 1,194,613 Commercial Mortgage Special mention $ — — 838 28,703 49,024 13,930 — — 92,495 Substandard — — — — 7,330 22,648 774 — 30,752 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 838 28,703 56,354 36,578 774 — 123,247 Pass/Watch 235,572 662,441 602,550 572,794 284,646 1,319,324 105,975 30,667 3,813,969 Total commercial mortgage $ 235,572 662,441 603,388 601,497 341,000 1,355,902 106,749 30,667 3,937,216 Multi-family Special mention $ — — — — — 1,683 — — 1,683 Substandard — — 439 — — 2,554 — — 2,993 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 439 — — 4,237 — — 4,676 Pass/Watch 51,221 154,053 284,440 155,014 193,026 548,473 2,695 1,163 1,390,085 Total multi-family $ 51,221 154,053 284,879 155,014 193,026 552,710 2,695 1,163 1,394,761 Construction Special mention $ — — — 939 19,014 — — — 19,953 Substandard — — — 382 2,365 — — — 2,747 Doubtful — — — — — — — — — Loss — — — — — — — — — 19 Gross Loans Held for Investment by Year of Origination at March 31, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Total criticized and classified — — — 1,321 21,379 — — — 22,700 Pass/Watch 15,848 224,941 167,494 218,541 41,172 2,404 6,315 676,715 Total construction $ 15,848 224,941 167,494 219,862 62,551 2,404 — 6,315 699,415 Total Mortgage Special mention $ — — 838 29,642 68,038 16,967 — — 115,485 Substandard — — 439 382 9,975 32,920 774 — 44,490 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 1,277 30,024 78,013 49,887 774 — 159,975 Pass/Watch 348,255 1,266,540 1,283,239 1,056,070 581,571 2,383,540 108,670 38,145 7,066,030 Total Mortgage $ 348,255 1,266,540 1,284,516 1,086,094 659,584 2,433,427 109,444 38,145 7,226,005 Commercial Special mention $ — — 129 829 3,227 53,407 2,563 1,305 61,460 Substandard — — 2 9,257 5,683 77,111 20,600 913 113,566 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 131 10,086 8,910 130,518 23,163 2,218 175,026 Pass/Watch 125,998 484,075 232,947 207,513 165,858 294,256 408,921 36,732 1,956,300 Total commercial $ 125,998 484,075 233,078 217,599 174,768 424,774 432,084 38,950 2,131,326 Consumer (1) Special mention $ — — — — — 2 — 88 90 Substandard — — — — 114 1,014 6 — 1,134 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — 114 1,016 6 88 1,224 Pass/Watch 7,666 23,475 3,559 19,820 19,832 105,679 119,412 15,922 315,365 Total consumer $ 7,666 23,475 3,559 19,820 19,946 106,695 119,418 16,010 316,589 Total Loans Special mention $ — — 967 30,471 71,265 70,376 2,563 1,393 177,035 Substandard — — 441 9,639 15,772 111,045 21,380 913 159,190 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 1,408 40,110 87,037 181,421 23,943 2,306 336,225 Pass/Watch 481,919 1,774,090 1,519,745 1,283,403 767,261 2,783,475 637,003 90,799 9,337,695 20 Gross Loans Held for Investment by Year of Origination at March 31, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Total gross loans $ 481,919 1,774,090 1,521,153 1,323,513 854,298 2,964,896 660,946 93,105 9,673,920 (1) For consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan. Gross Loans Held for 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 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 — — — — — — — — — Total criticized and classified — 1,125 — 2,365 — — — — 3,490 21 Gross Loans Held for 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 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 22 Gross Loans Held for 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 (1) For consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan. Note 4. Deposits Deposits at March 31, 2022 and December 31, 2021 are summarized as follows (in thousands): March 31, 2022 December 31, 2021 Savings $ 1,490,624 1,460,541 Money market 2,652,077 2,592,523 NOW 3,705,969 3,722,198 Non-interest bearing 2,825,762 2,766,235 Certificates of deposit 691,655 692,515 Total deposits $ 11,366,087 11,234,012 Note 5. Borrowed Funds Borrowed funds at March 31, 2022 and December 31, 2021 are summarized as follows (in thousands): March 31, 2022 December 31, 2021 Securities sold under repurchase agreements $ 118,759 116,760 FHLB line of credit — — FHLB advances 280,848 510,014 Total borrowed funds $ 399,606 626,774 At March 31, 2022, FHLB advances were at fixed rates and mature between April 2022 and July 2025, and at December 31, 2021, FHLB advances were at fixed rates with maturities between January 2022 and July 2025. These advances are secured by loans receivable under a blanket collateral agreement. Scheduled maturities of FHLB advances at March 31, 2022 are as follows (in thousands): 2022 Due in one year or less $ 102,971 Due after one year through two years 45,049 Due after two years through three years 74,668 Due after three years through four years 58,160 Thereafter — Total FHLB advances $ 280,848 Scheduled maturities of securities sold under repurchase agreements at March 31, 2022 are as follows (in thousands): 2022 Due in one year or less $ 118,759 Thereafter — Total securities sold under repurchase agreements $ 118,759 23 The following tables set forth certain information as to borrowed funds for the periods ended March 31, 2022 and December 31, 2021 (in thousands): Maximum balance Average balance Weighted average interest rate March 31, 2022 Securities sold under repurchase agreements $ 120,188 117,615 0.30 % FHLB line of credit — — — FHLB advances 488,996 432,064 0.99 December 31, 2021 Securities sold under repurchase agreements $ 132,005 116,158 0.07 % FHLB line of credit — 205 0.34 FHLB advances 941,939 673,014 1.27 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 March 31, 2022 and December 31, 2021, available for sale debt securities pledged as collateral for repurchase agreements totaled $ 133.3 million and $ 136.0 million, respectively. Interest expense on borrowings for the three months ended March 31, 2022 and 2021 was $ 1.2 million and $ 2.8 million, respectively. Note 6. 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 (benefit) increase cost for pension benefits and other post-retirement benefits for the three months ended March 31, 2022 and 2021, includes the following components (in thousands): Three months ended March 31, Pension benefits Other post-retirement benefits 2022 2021 2022 2021 Service cost $ — — 7 9 Interest cost 214 198 111 106 Expected return on plan assets ( 864 ) ( 807 ) — — Amortization of prior service cost — — — — Amortization of the net loss (gain) — 118 ( 326 ) ( 268 ) Net periodic (benefit) cost $ ( 650 ) ( 491 ) ( 208 ) ( 153 ) In its consolidated financial statements for the year ended December 31, 2021, the Company previously disclosed that it does not expect to contribute to the pension plan in 2022. As of March 31, 2022, 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 months ended March 31, 2022 were calculated using the January 1, 2022 pension and other post-retirement benefits actuarial valuations. 24 Note 7. Impact of Recent Accounting Pronouncements Accounting Pronouncements Not Yet Adopted 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 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted if an entity has adopted ASU 2016-13. The Company continues to assess the impact that this guidance will have on the Company’s consolidated financial statements. In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method." This ASU clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets. The ASU amends the guidance in ASU 2017-12 that, among other things, established the “last-of-layer” method 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 nonprepayable 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. 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, ASU 2022-01 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted if an entity has adopted ASU 2017-12. The Company continues to assess the impact that this guidance will have on the Company’s consolidated financial statements. . 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 (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 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 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 25 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. The Company continues to assess the impacts of this guidance, and has not determined whether LIBOR transition and this guidance will have a material effect on the Company's business operations and consolidated financial statements. Note 8. 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 at 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. For the three months ended March 31, 2022, the Company recorded a $ 2.4 million benefit to the provision for credit losses for off-balance sheet credit exposures compared to an $ 875,000 benefit to the provision for credit losses for off-balance sheet credit exposures for the same period in 2021. The increase in the period-over period provision benefit was primarily due to an increase in line of credit utilization. The allowance for credit losses for off-balance sheet credit exposures was $ 4.1 million and $ 6.5 million at March 31, 2022 and December 31, 2021, respectively, and are included in other liabilities on the Consolidated Statements of Financial Condition. 26 Note 9. 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 March 31, 2022 and December 31, 2021. 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 27 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 (loss) income, and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects 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 March 31, 2022 and December 31, 2021. 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 March 31, 2022 and December 31, 2021. The following tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair values as of March 31, 2022 and December 31, 2021, by level within the fair value hierarchy (in thousands): 28 Fair Value Measurements at Reporting Date Using: March 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: Available for sale debt securities: U.S. Treasury obligations $ 260,165 260,165 — — Mortgage-backed securities 1,670,464 — 1,670,464 — Asset-backed securities 44,936 — 44,936 — State and municipal obligations 63,846 — 63,846 — Corporate obligations 32,926 — 32,926 — Total available for sale debt securities 2,072,337 260,165 1,812,172 — Equity securities 1,256 1,256 — — Derivative assets 79,231 — 79,231 — $ 2,152,824 261,421 1,891,403 — Derivative liabilities $ 60,644 — 60,644 — Measured on a non-recurring basis: Loans measured for impairment based on the fair value of the underlying collateral $ 16,173 — — 16,173 Foreclosed assets 8,578 — — 8,578 $ 24,751 — — 24,751 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) Measured on a recurring basis: Available for sale debt securities: U.S. Treasury obligations $ 196,329 196,329 — — Mortgage-backed securities 1,708,831 — 1,708,831 — Asset-backed securities 46,797 — 46,797 — State and municipal obligations 69,707 — 69,707 — Corporate obligations 36,187 — 36,187 — Total available for sale debt securities 2,057,851 196,329 1,861,522 — Equity Securities 1,325 1,325 — — Derivative assets 65,903 — 65,903 — $ 2,125,079 197,654 1,927,425 — Derivative liabilities $ 61,412 — 61,412 — Measured on a non-recurring basis: Loans measured for impairment based on the fair value of the underlying collateral $ 18,237 — — 18,237 Foreclosed assets 8,731 — — 8,731 $ 26,968 — — 26,968 There were no transfers between Level 1, Level 2 and Level 3 during the three months ended March 31, 2022. 29 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 in cash and cash equivalents at March 31, 2022 and December 31, 2021 was $ 4.8 million and $ 27.3 million, respectively, representing cash collateral pledged to secure loan level swaps 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 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. 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 30 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 March 31, 2022 and December 31, 2021. Fair values are presented by level within the fair value hierarchy. 31 Fair Value Measurements at March 31, 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 $ 433,146 433,146 433,146 — — Available for sale debt securities: U.S. Treasury obligations 260,165 260,165 260,165 — — Mortgage-backed securities 1,670,464 1,670,464 — 1,670,464 — Asset-backed securities 44,936 44,936 — 44,936 — State and municipal obligations 63,846 63,846 — 63,846 — Corporate obligations 32,926 32,926 — 32,926 — Total available for sale debt securities $ 2,072,337 2,072,337 260,165 1,812,172 — Held to maturity debt securities, net of allowance for credit losses: US Treasury obligations 1,430 1,430 1,430 — — Agency obligations 9,997 9,375 9,375 — — Mortgage-backed securities 13 13 — 13 — State and municipal obligations 400,606 397,415 — 397,415 — Corporate obligations 9,912 9,431 — 9,431 — Total held to maturity debt securities, net of allowance for credit losses $ 421,958 417,664 10,805 406,859 — FHLBNY stock 23,973 23,973 23,973 — — Equity Securities 1,256 1,256 1,256 — — Loans, net of allowance for credit losses 9,586,607 9,586,361 — — 9,586,361 Derivative assets 79,231 79,231 — 79,231 — Financial liabilities: Deposits other than certificates of deposits $ 10,674,432 10,674,432 10,674,432 — — Certificates of deposit 691,655 690,591 — 690,591 — Total deposits $ 11,366,087 11,365,023 10,674,432 690,591 — Borrowings 399,606 386,705 — 386,705 — Subordinated debentures 10,336 9,594 — 9,594 — Derivative liabilities 60,644 60,644 — 60,644 — 32 Fair Value Measurements at December 31, 2021 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 $ 712,463 712,463 712,463 — — Available for sale debt securities: U.S. Treasury obligations 196,329 196,329 196,329 — — Mortgage-backed securities 1,708,831 1,708,831 — 1,708,831 — Asset-backed securities 46,797 46,797 — 46,797 — State and municipal obligations 69,707 69,707 — 69,707 — Corporate obligations 36,187 36,187 — 36,187 — Total available for sale debt securities $ 2,057,851 2,057,851 196,329 1,861,522 — Held to maturity debt securities: Agency obligations $ 9,996 9,821 9,821 — — Mortgage-backed securities 21 21 — 21 — State and municipal obligations 415,699 429,552 — 429,552 — Corporate obligations 10,434 10,315 — 10,315 — Total held to maturity debt securities $ 436,150 449,709 9,821 439,888 — FHLBNY stock 34,290 34,290 34,290 — — Equity Securities 1,325 1,325 1,325 — — Loans, net of allowance for credit losses 9,500,884 9,607,225 — — 9,607,225 Derivative assets 65,903 65,903 — 65,903 — Financial liabilities: Deposits other than certificates of deposits $ 10,541,497 10,541,497 10,541,497 — — Certificates of deposit 692,515 694,041 — 694,041 — Total deposits $ 11,234,012 11,235,538 10,541,497 694,041 — Borrowings 626,774 625,636 — 625,636 — Subordinated debentures 10,283 9,750 — 9,750 — Derivative liabilities 61,412 61,412 — 61,412 — 33 Note 10. Other Comprehensive Income (Loss) The following table presents the components of other comprehensive loss, both gross and net of tax, for the three months ended March 31, 2022 and 2021 (in thousands): Three months ended March 31, 2022 2021 Before Tax Tax Effect After Tax Before Tax Tax Effect After Tax Components of Other Comprehensive Income: Unrealized gains and losses on available for sale debt securities: Net unrealized losses arising during the period $ ( 116,081 ) 31,110 ( 84,971 ) ( 12,152 ) 3,133 ( 9,019 ) Reclassification adjustment for gains included in net income — — — ( 230 ) 59 ( 171 ) Total ( 116,081 ) 31,110 ( 84,971 ) ( 12,382 ) 3,192 ( 9,190 ) Unrealized gains on derivatives (cash flow hedges) 14,260 ( 3,822 ) 10,438 6,226 ( 1,605 ) 4,621 Amortization related to post-retirement obligations ( 378 ) 102 ( 276 ) ( 150 ) 41 ( 109 ) Total other comprehensive (loss) income $ ( 102,199 ) 27,390 ( 74,809 ) ( 6,306 ) 1,628 ( 4,678 ) The following tables present the changes in the components of accumulated other comprehensive (loss) income, net of tax, for the three months ended March 31, 2022 and 2021 (in thousands): Changes in Accumulated Other Comprehensive (Loss) Income by Component, net of tax for the three months ended March 31, 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 (Loss) Balance at December 31, $ ( 211 ) 2,981 4,093 6,863 23,690 ( 1,081 ) ( 4,954 ) 17,655 Current - period other comprehensive (loss) ( 84,971 ) ( 276 ) 10,438 ( 74,809 ) ( 9,190 ) ( 109 ) 4,621 ( 4,678 ) Balance at March 31, $ ( 85,182 ) 2,705 14,531 ( 67,946 ) 14,500 ( 1,190 ) ( 333 ) 12,977 34 The following tables summarize the reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of income for the three and three months ended March 31, 2022 and 2021 (in thousands): Reclassifications From Accumulated Other Comprehensive Income ("AOCI") Amount reclassified from AOCI for the three months ended March 31, Affected line item in the Consolidated Statement of Income 2022 2021 Details of AOCI: Available for sale debt securities: Realized net gains on the sale of securities available for sale $ — ( 230 ) Net gain on securities transactions — 59 Income tax expense — ( 171 ) Net of tax Cash flow hedges: Unrealized losses on derivatives 666 879 Interest expense ( 178 ) ( 227 ) Income tax expense 488 652 Post-retirement obligations: Amortization of actuarial gains $ ( 326 ) ( 150 ) Compensation and employee benefits (1) 87 41 Income tax expense $ ( 239 ) ( 109 ) Net of tax Total reclassifications $ 249 372 Net of tax (1) This item is included in the computation of net periodic benefit cost. See Note 6. Components of Net Periodic Benefit Cost. 35 Note 11. 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 March 31, 2022 and December 31, 2021, the Company had 166 loan related interest rate swaps, with an aggregate notional amount of $ 2.43 billion and $ 2.42 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. At March 31, 2022 and December 31, 2021, the Company had 13 credit derivatives, with aggregate notional amounts of $ 147.2 million and $ 144.8 million, respectively, from participations in interest rate swaps as part of these loan participation arrangements. At March 31, 2022 and December 31, 2021, the fair value of these credit derivatives were $ 77,700 and $ 108,800 , respectively. 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 months ended March 31, 2022 and 2021, such derivatives were used to hedge the variable cash outflows associated with FHLBNY borrowings and brokered demand deposits. Amounts reported in accumulated other comprehensive (loss) 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 $ 4.9 million will be reclassified as a reduction to interest expense. As of March 31, 2022, the Company had 13 outstanding interest rate derivatives with an aggregate notional amount of $ 500.0 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 Financial Condition at March 31, 2022 and December 31, 2021 (in thousands). 36 Fair Values of Derivative Instruments as of March 31, 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 $ 1,200,002 Other assets $ 59,907 $ 1,200,002 Other liabilities $ 60,594 Credit contracts 33,621 Other assets 56 99,741 Other liabilities 32 Total derivatives not designated as a hedging instrument 59,963 60,626 Derivatives designated as a hedging instrument: Interest rate products 460,000 Other assets 19,207 20,000 Other liabilities 60 Total gross derivative amounts recognized on the balance sheet 79,170 60,686 Gross amounts offset on the balance sheet — — Net derivative amounts presented on the balance sheet $ 79,170 $ 60,686 Gross amounts not offset on the balance sheet: Financial instruments - institutional counterparties $ 5,558 $ 5,558 Cash collateral - institutional counterparties (1) 62,840 4,630 Net derivatives not offset $ 10,772 $ 50,498 37 Fair Values of Derivative Instruments as of December 31, 2021 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 $ 1,188,703 Other assets $ 59,110 $ 1,188,703 Other liabilities $ 60,163 Credit contracts 33,683 Other assets 76 97,213 Other liabilities 46 Total derivatives not designated as a hedging instrument 59,186 60,209 Derivatives designated as a hedging instrument: Interest rate products 250,000 Other assets 7,278 350,000 Other liabilities 2,263 Total gross derivative amounts recognized on the balance sheet 66,464 62,472 Gross amounts offset on the balance sheet — — Net derivative amounts presented on the balance sheet $ 66,464 $ 62,472 Gross amounts not offset on the balance sheet: Financial instruments - institutional counterparties $ 18,618 $ 18,618 Cash collateral - institutional counterparties (1) — 26,566 Net derivatives not offset $ 47,846 $ 17,288 (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 March 31, 2022 and December 31, 2021. The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income during the three months ended March 31, 2022 and 2021 (in thousands). Gain recognized in income on derivatives for the three months ended Consolidated Statements of Income March 31, 2022 March 31, 2021 Derivatives not designated as a hedging instrument: Interest rate products Other income $ 366 400 Credit contracts Other income ( 17 ) 23 Total $ 349 423 Consolidated Statements of Income Loss recognized in expense on derivatives for the three months ended March 31, 2022 March 31, 2021 Derivatives designated as a hedging instrument: Interest rate products Interest expense $ 666 879 Total $ 666 879 38 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 March 31, 2022, the Company had four dealer counterparties. The Company had a net liability position with respect to one of the counterparties. The termination value for this net liability position, which includes accrued interest, was $ 5.6 million at March 31, 2022. The Company has minimum collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $ 4.8 million against its obligations under these agreements. If the Company had breached any of these provisions at March 31, 2022, it could have been required to settle its obligations under the agreements at the termination value. Note 12. 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 the three months ended March 31, 2022, and 2021 the out-of-scope revenue related to financial instruments was 83.4 % and 82.3 %, respectively, of the Company's total revenue. 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 months ended March 31, 2022 and 2021 (in thousands): Three months ended March 31, 2022 2021 Non-interest income In-scope of Topic 606: Wealth management fees $ 7,466 7,134 Insurance agency income 3,420 2,727 Banking service charges and other fees: Service charges on deposit accounts 2,960 2,497 Debit card and ATM fees 770 1,778 Total banking service charges and other fees 3,730 4,275 Total in-scope non-interest income 14,616 14,136 Total out-of-scope non-interest income 5,532 7,501 Total non-interest income $ 20,148 21,637 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, 39 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 13. Leases The following table represents the consolidated statements of financial condition classification of the Company’s right-of use-assets and lease liabilities at March 31, 2022 and December 31, 2021 (in thousands): Classification March 31, 2022 December 31, 2021 Lease Right-of-Use Assets: Operating lease right-of-use assets Other assets $ 65,417 $ 48,808 Lease Liabilities: Operating lease liabilities Other liabilities $ 67,227 $ 50,236 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. Generally, the Company considers the first renewal option to be reasonably certain and includes it 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 March 31, 2022, the weighted-average remaining lease term and the weighted-average discount rate for the Company's operating leases were 9.2 years and 2.50 %, 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): For the Three Months Ended March 31, 2022 March 31, 2021 Lease Costs: Operating lease cost $ 2,807 $ 2,812 Variable lease cost 718 803 Total lease cost $ 3,525 $ 3,615 For the Three Months Ended March 31, 2022 March 31, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,939 $ 2,345 During the three months ended March 31, 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. 40 Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2022, were as follows (in thousands): Operating leases Twelve months ended: Remainder of 2022 $ 6,625 2023 9,167 2024 9,004 2025 8,466 2026 7,267 Thereafter 35,208 Total future minimum lease payments 75,737 Amounts representing interest 8,510 Present value of net future minimum lease payments $ 67,227 41