What changed in this filing

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Item 1. Financial Statements

2023-08-08 compared with 2023-05-10 · 374 added, 231 removed, 930 unchanged (39% of the section changed)

3 unchanged sentences

Consolidated Statements of Financial Condition

March 31, 2023 (Unaudited) and December 31, 2022

June 30, 2023 (Unaudited) and December 31, 2022

(Dollars in Thousands)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and due from banks $ 208,842 $ 186,490

2 unchanged sentences

Available for sale debt securities, at fair value 1,749,889 1,803,548

Held to maturity debt securities, net (fair value of $ 371,397 and $ 373,468 at March 31, 2023 and December 31, 2022, respectively).

Held to maturity debt securities, net (fair value of $ 365,029 at June 30, 2023 (unaudited) and $ 373,468 at December 31, 2022)

378,894 387,923

24 unchanged sentences

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 75,467,890 shares outstanding at March 31, 2023, and 83,209,012 shares issued and 75,169,196 shares outstanding at December 31, 2022, respectively.

Common stock, $ 0.01 par value, 200,000,000 shares authorized, 83,209,012 shares issued and 75,530,425 shares outstanding at June 30, 2023 and 75,169,196 outstanding at December 31, 2022

Additional paid-in capital 986,150 981,138

Retained earnings 954,403 918,158

Accumulated other comprehensive loss ( 148,146 ) ( 165,045 )

Accumulated other comprehensive (loss) income ( 162,493 ) ( 165,045 )

Treasury stock ( 127,818 ) ( 127,154 )

Unallocated common stock held by the Employee Stock Ownership Plan ( 8,603 ) ( 10,226 )

Common stock acquired by the Directors' Deferred Fee Plan ("DDFP") ( 3,289 ) ( 3,427 )

Deferred Compensation - Directors' Deferred Fee Plan 3,289 3,427

Common stock acquired by deferred compensation plans ( 3,150 ) ( 3,427 )

Deferred compensation plans 3,150 3,427

Total stockholders’ equity 1,642,471 1,597,703

4 unchanged sentences

Consolidated Statements of Income

Three months ended March 31, 2023 and 2022 (Unaudited)

Three and six months ended June 30, 2023 and 2022 (Unaudited)

(Dollars in Thousands, except per share data)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Interest income:

19 unchanged sentences

Bank-owned life insurance 1,534 1,563 3,018 2,741

Net (losses) gains on securities transactions ( 5 ) 16

Net gains on securities transactions 29 141 24 157

Other income 1,283 1,930 4,552 3,108

7 unchanged sentences

Advertising and promotion expense 1,379 1,222 2,589 2,326

Provision charge (benefit) for credit losses on off-balance sheet credit exposures 739 ( 2,390 )

Provision (benefit) charge for credit losses on off-balance sheet credit exposures ( 647 ) ( 973 ) 92 ( 3,363 )

Merger-related expenses 1,960 — 3,060 —

Other operating expenses 9,949 9,826 21,032 19,191

11 unchanged sentences

Consolidated Statements of Comprehensive Income

Three months ended March 31, 2023 and 2022 (Unaudited)

Three and six months ended June 30, 2023 and 2022 (Unaudited)

(Dollars in Thousands)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Net income $ 32,003 $ 39,228 $ 72,539 $ 83,191

1 unchanged sentence

Unrealized gains and losses on available for sale debt securities:

Net unrealized gains (losses) arising during the period 20,864 ( 84,971 )

Net unrealized (losses) gains arising during the period ( 14,726 ) ( 45,733 ) 6,138 ( 130,704 )

Reclassification adjustment for gains included in net income — ( 42 ) — ( 42 )

Total ( 14,726 ) ( 45,775 ) 6,138 ( 130,746 )

Unrealized (losses) gains on derivatives ( 3,696 ) 10,438

Unrealized gains and losses on derivatives:

Net unrealized gains arising during the period 3,650 2,276 3,033 12,227

Reclassification adjustment for (gains) losses included in net income ( 3,010 ) ( 118 ) ( 6,089 ) 369

Total 640 2,158 ( 3,056 ) 12,596

Amortization related to post-retirement obligations ( 261 ) ( 236 ) ( 530 ) ( 512 )

Total other comprehensive income (loss) 16,899 ( 74,809 )

Total other comprehensive (loss) income ( 14,347 ) ( 43,853 ) 2,552 ( 118,662 )

Total comprehensive income (loss) $ 17,656 $ ( 4,625 ) $ 75,091 $ ( 35,471 )

3 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended March 31, 2022 (Unaudited)

For the three and six months ended June 30, 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) TREASURYSTOCK UNALLOCATED ESOP SHARES COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS DEFERRED COMPENSATION PLANS TOTAL STOCKHOLDERS’ EQUITY

For the three months ended June 30, 2022

COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED EARNINGS ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME TREASURYSTOCK UNALLOCATED ESOP SHARES COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS DEFERRED COMPENSATION PLANS TOTAL STOCKHOLDERS’ EQUITY

Balance at March 31, 2022 $ 832 $ 972,552 $ 839,807 $ ( 67,946 ) $ ( 109,581 ) $ ( 14,533 ) $ ( 3,844 ) $ 3,844 $ 1,621,131

Net income — — 39,228 — — — — — 39,228

Other comprehensive loss, net of tax — — — ( 43,853 ) — — — — ( 43,853 )

Cash dividends paid — — ( 18,058 ) — — — — — ( 18,058 )

Distributions from deferred comp plans — 41 — — — — 139 ( 139 ) 41

Purchases of treasury stock — — — — ( 17,505 ) — — — ( 17,505 )

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

Allocation of ESOP shares — 250 — — — 812 — — 1,062

Allocation of Stock Award Plan ("SAP") shares — 3,174 — — — — — — 3,174

Allocation of stock options — 50 — — — — — — 50

Balance at June 30, 2022 $ 832 $ 976,067 $ 860,977 $ ( 111,799 ) $ ( 127,091 ) $ ( 13,721 ) $ ( 3,705 ) $ 3,705 $ 1,585,265

For the six months ended June 30, 2022

COMMONSTOCK ADDITIONAL

PAID-IN CAPITAL RETAINEDEARNINGS ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) TREASURYSTOCK UNALLOCATED

ESOP SHARES COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS DEFERRED COMPENSATION PLANS TOTAL

STOCKHOLDERS’ EQUITY

Balance at December 31, 2021 $ 832 $ 969,815 $ 814,533 $ 6,863 $ ( 79,603 ) $ ( 15,344 ) $ ( 3,984 ) $ 3,984 $ 1,697,096

2 unchanged sentences

Cash dividends paid — — ( 36,747 ) — — — — — ( 36,747 )

Distributions from DDFP — 45 — — — — 140 ( 140 ) 45

Distributions from deferred comp plans — 86 — — — — 279 ( 279 ) 86

Purchases of treasury stock — — — — ( 46,530 ) — — — ( 46,530 )

2 unchanged sentences

Allocation of ESOP shares — 582 — — — 1,623 — — 2,205

Allocation of Stock Award Plan ("SAP") shares — 2,311 — — — — — — 2,311

Allocation of SAP shares — 5,485 — — — — — — 5,485

Allocation of stock options — 99 — — — — — — 99

Balance at March 31, 2022 $ 832 $ 972,552 $ 839,807 $ ( 67,946 ) $ ( 109,581 ) $ ( 14,533 ) $ ( 3,844 ) $ 3,844 $ 1,621,131

Balance at June 30, 2022 $ 832 $ 976,067 $ 860,977 $ ( 111,799 ) $ ( 127,091 ) $ ( 13,721 ) $ ( 3,705 ) $ 3,705 $ 1,585,265

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

For the three months ended March 31, 2023 (Unaudited)

For the three and six months ended June 30, 2023 (Unaudited)

(Dollars in Thousands)

For the three months ended March 31, 2023

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, 2022 $ 832 $ 981,138 $ 918,158 $ ( 165,045 ) $ ( 127,154 ) $ ( 10,226 ) $ ( 3,427 ) $ 3,427 $ 1,597,703

For the three months ended June 30, 2023

COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED EARNINGS ACCUMULATED OTHER COMPREHENSIVE LOSS TREASURY STOCK UNALLOCATED ESOP SHARES COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS DEFERRED COMPENSATION PLANS TOTAL STOCKHOLDERS’ EQUITY

Balance at March 31, 2023 832 984,089 940,533 ( 148,146 ) ( 127,814 ) ( 9,414 ) ( 3,289 ) 3,289 1,640,080

Net income — — 32,003 — — — — — 32,003

1 unchanged sentence

Cash dividends paid — — ( 18,133 ) — — — — — ( 18,133 )

Distributions from deferred comp plans — 32 — — — — 139 ( 139 ) 32

Purchases of treasury stock — — — — — — — — —

Purchase of employee restricted shares to fund statutory tax withholding — — — — ( 4 ) — — — ( 4 )

Stock option exercises — — — — — — — — —

Allocation of ESOP shares — ( 1 ) — — — 811 — — 810

Allocation of SAP shares — 1,997 — — — — — — 1,997

Allocation of stock options — 33 — — — — — — 33

Balance at June 30, 2023 $ 832 $ 986,150 $ 954,403 $ ( 162,493 ) $ ( 127,818 ) $ ( 8,603 ) $ ( 3,150 ) $ 3,150 $ 1,642,471

For the six months ended June 30, 2023

COMMONSTOCK ADDITIONAL

CAPITAL RETAINED EARNINGS ACCUMULATED

COMPREHENSIVE

LOSS TREASURY

STOCK UNALLOCATED

SHARES COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS DEFERRED COMPENSATION PLANS TOTAL STOCKHOLDERS’ EQUITY

Balance at December 31, 2022 $ 832 $ 981,138 $ 918,158 $ ( 165,045 ) $ ( 127,154 ) $ ( 10,226 ) $ ( 3,427 ) $ 3,427 $ 1,597,703

Net income — — 72,539 — — — — — 72,539

Other comprehensive income, net of tax — — — 2,552 — — — — 2,552

Cash dividends paid — — ( 36,727 ) — — — — — ( 36,727 )

Cumulative effect of adopting Accounting Standards Update ("ASU") No.

2022-02, net of tax — — 433 — — — — — 433

Distributions from DDFP — 47 — — — — 138 ( 138 ) 47

Distributions from deferred comp plans — 79 — — — — 277 ( 277 ) 79

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

3 unchanged sentences

Allocation of stock options — 77 — — — — — — 77

Balance at March 31, 2023 $ 832 $ 984,089 $ 940,533 $ ( 148,146 ) $ ( 127,814 ) $ ( 9,414 ) $ ( 3,289 ) $ 3,289 $ 1,640,080

Balance at June 30, 2023 $ 832 $ 986,150 $ 954,403 $ ( 162,493 ) $ ( 127,818 ) $ ( 8,603 ) $ ( 3,150 ) $ 3,150 $ 1,642,471

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Three months ended March 31, 2023 and 2022 (Unaudited)

Six months ended June 30, 2023 and 2022 (Unaudited)

(Dollars in Thousands)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Provision charge (benefit) for credit losses on off-balance sheet credit exposures 92 ( 3,363 )

Deferred tax expense 357 10,625

Deferred tax (benefit) expense ( 2,332 ) 3,393

Amortization of operating lease right-of-use assets 5,257 5,393

6 unchanged sentences

ESOP expense 1,866 2,205

Allocation of stock award shares 2,833 2,311

Allocation of stock options 44 49

Allocation of stock award expense 4,830 5,485

Allocation of stock option expense 77 99

Net gain on sale of loans ( 972 ) ( 824 )

Net loss (gain) on securities transactions 5 ( 16 )

Net gain on securities transactions ( 24 ) ( 157 )

Net gain on sale of premises and equipment ( 197 ) ( 22 )

Net gain on sale of foreclosed assets ( 2,789 ) ( 16 )

(Increase) decrease in accrued interest receivable ( 137 ) 957

Increase in accrued interest receivable ( 1,942 ) ( 868 )

Decrease (increase) in other assets 7,490 ( 12,691 )

2 unchanged sentences

Cash flows from investing activities:

Net decrease (increase) in loans 14,278 ( 71,108 )

Net increase in loans ( 285,500 ) ( 396,236 )

Purchases of loans ( 3,394 ) ( 3,422 )

2 unchanged sentences

Purchases of investment securities held to maturity ( 9,130 ) ( 12,369 )

Proceeds from maturities and paydowns of available for sale debt securities 43,081 84,128

Purchases of securities available for sale ( 34,802 ) ( 218,082 )

Proceeds from maturities, calls and paydowns of available for sale debt securities 92,681 166,855

Purchases of available for sale debt securities ( 34,802 ) ( 241,725 )

Proceeds from redemption of Federal Home Loan Bank stock 112,279 31,134

3 unchanged sentences

Purchases of premises and equipment ( 2,959 ) ( 5,944 )

Net cash provided by (used in) investing activities 19,514 ( 192,237 )

Net cash used in investing activities ( 244,441 ) ( 476,076 )

Cash flows from financing activities:

Net (decrease) increase in deposits ( 265,667 ) 132,075

Net decrease in deposits ( 301,904 ) ( 359,788 )

Increase in mortgage escrow deposits 8,575 7,906

Cash dividends paid to stockholders ( 36,727 ) ( 36,747 )

Six months ended June 30,

Purchase of treasury stock — ( 46,530 )

Three months ended March 31,

Purchase of employee restricted shares to fund statutory tax withholding ( 1,671 ) ( 958 )

2 unchanged sentences

Payments on long-term borrowings ( 32,500 ) ( 579,111 )

Net (decrease) increase in short-term borrowings ( 221,497 ) 1,943

Net cash used in financing activities ( 30,235 ) ( 138,015 )

Net increase (decrease) in short-term borrowings 98,313 ( 9,161 )

Net cash provided by (used in) financing activities 181,407 ( 60,389 )

Net increase (decrease) in cash and cash equivalents 22,364 ( 434,931 )

17 unchanged sentences

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”).

(the "Company") and its wholly owned subsidiary, Provident Bank (the “Bank") and its wholly owned subsidiaries.

In preparing the interim unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and the consolidated statements of income for the periods presented.

Actual results could differ from these estimates.

The allowance for credit losses and the valuation of deferred tax assets are estimates that are particularly susceptible to change.

The allowance for credit losses is a material estimate that is particularly susceptible to near-term change.

The interim unaudited consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations that may be expected for all of 2023.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations that may be expected for all of 2023.

Certain information and note disclosures normally included in financial statements prepared in accordance with U.S.

2 unchanged sentences

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, 2023 and 2022 (dollars in thousands, except per share amounts):

Three months ended March 31,

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

Three months ended June 30,

Income Weighted

8 unchanged sentences

Income available to common stockholders $ 32,003 74,830,187 $ 0.43 $ 39,228 74,400,788 $ 0.53

Anti-dilutive stock options and awards at March 31, 2023 and 2022, totaling 984,877 shares and 971,452 shares, respectively, were excluded from the earnings per share calculations.

Six months ended June 30,

Income Weighted

Outstanding Per

Income Weighted

Common Shares Outstanding Per

Net income $ 72,539 $ 83,191

Basic earnings per share:

Income available to common stockholders $ 72,539 74,734,795 $ 0.97 $ 83,191 75,068,154 $ 1.11

Dilutive shares 32,053 84,132

Diluted earnings per share:

Income available to common stockholders $ 72,539 74,766,848 $ 0.97 $ 83,191 75,152,286 $ 1.11

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

Loans Receivable and Allowance for Credit Losses

1 unchanged sentence

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, 2023, a worsening economic forecast and related deterioration in the projected commercial property price index over the expected life of the loan portfolio led to increases 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.

For the three and six months ended June 30, 2023, a worsened economic forecast and related deterioration in the projected commercial property price indices over the expected life of the loan portfolio within our CECL model led to increases to the provisions for credit losses and off-balance sheet credit exposures.

See Notes 4 and 9 to the Consolidated Financial Statements for more information on the allowance for credit losses on loans and off-balance sheet credit exposures.

Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets acquired through purchase acquisitions.

4 unchanged sentences

The Company completed its most recent annual goodwill impairment test as of July 1, 2023.

At March 31, 2023, the Company performed an interim goodwill impairment analysis and concluded that no triggering considerations were met and therefore a test for impairment between annual tests was not required.

At June 30, 2023, the Company performed an interim goodwill impairment analysis and concluded that no triggering considerations were met and therefore a test for impairment between annual tests was not required.

Business Combinations

Lakeland Bancorp, Inc.

- Merger Agreement

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

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

The merger agreement has been unanimously approved by the boards of both companies and shareholder approval has also been received for both companies.

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

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

Investment Securities

At March 31, 2023, the Company had $ 1.82 billion and $ 381.5 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, 2023 totaled 755 , compared with 914 at December 31, 2022.

The decline in the number of securities in an unrealized loss position at March 31, 2023 was due to lower current market treasury rates compared to rates at December 31, 2022.

Management classifies the held to maturity debt securities portfolio into the following security types:

• Agency obligations;

• Mortgage-backed securities;

• State and municipal obligations;

• 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, 2023 and the Company had one security rated BBB by Moody’s Investors Service.

At June 30, 2023, the Company had $ 1.75 billion and $ 378.9 million in available for sale debt securities and held to maturity debt securities, respectively.

Many factors, including lack of liquidity in the secondary market for certain securities, variations in pricing information, changes in interest rates, regulatory actions, changes in the business environment or any changes in the

competitive marketplace could have an adverse effect on the Company’s investment portfolio.

The total number of available for sale and held to maturity debt securities in an unrealized loss position at June 30, 2023 totaled 937 , compared with 914 at December 31, 2022.

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

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, 2023 and December 31, 2022 (in thousands):

March 31, 2023

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

June 30, 2023

Treasury obligations $ 276,106 — ( 29,039 ) 247,067

12 unchanged sentences

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

The amortized cost and fair value of available for sale debt securities at March 31, 2023, by contractual maturity, are shown below (in thousands).

The amortized cost and fair value of available for sale debt securities at June 30, 2023, by contractual maturity, are shown below (in thousands).

Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.

March 31, 2023

June 30, 2023

Due in one year or less $ — —

4 unchanged sentences

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

For the three months ended March 31, 2023, no securities were sold or called from the available for sale debt securities portfolio.

For the three months ended March 31, 2022, no securities were sold or called from the available for sale debt securities portfolio.

The number of available for sale debt securities in an unrealized loss position at March 31, 2023 totaled 458 , compared with 475 at December 31, 2022.

The decline in the number of securities in an unrealized loss position at March 31, 2023 was due to lower current market treasury rates compared to rates at December 31, 2022.

All securities in an unrealized loss position were investment grade at March 31, 2023.

There were no sales of securities from the available for sale debt securities portfolio for the three and six months ended June 30, 2023 and 2022.

For the three and six months ended June 30, 2023, there were no proceeds from calls on securities in the available for sale debt securities portfolio.

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

The number of available for sale debt securities in an unrealized loss position at June 30, 2023 totaled 464 , compared with 475 at December 31, 2022.

The decline in the number of securities in an unrealized loss position at June 30, 2023 was due to maturities and calls of securities in the quarter.

All securities in an unrealized loss position were investment grade at June 30, 2023.

Held to Maturity Debt Securities

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

March 31, 2023

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

June 30, 2023

Agency obligations $ 12,096 — ( 929 ) 11,167

8 unchanged sentences

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 each of the three months ended March 31, 2023 and 2022.

For the three months ended March 31, 2023, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $ 3.1 million with no gross gains and gross losses of $ 5,000 .

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.

The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio at March 31, 2023 by contractual maturity are shown below (in thousands).

There were no sales of securities from the held to maturity debt securities portfolio for the three and six months ended June 30, 2023 and 2022.

For the three and six months ended June 30, 2023, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $ 3.5 million and $ 6.6 million, respectively.

As to these calls on securities, for the three months ended June 30, 2023, there were gross gains of $ 28,000 and no gross losses, while for the six months ended June 30, 2023, gross gains totaled $ 24,000 , with no gross losses.

For the three and six months ended June 30, 2022, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $ 10.3 million and $ 26.2 million, respectively.

As to these calls on securities for the three and six months ended June 30, 2022, gross gains totaled $ 83,000 and $ 99,000 , respectively, with no gross losses.

The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio at June 30, 2023 by contractual maturity are shown below (in thousands).

Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.

March 31, 2023

June 30, 2023

Due in one year or less $ 25,283 25,199

3 unchanged sentences

$ 378,919 365,029

The allowance for credit losses on held to maturity debt securities at March 31, 2023 and December 31, 2022 was $ 28,000 and $ 27,000 , respectively, and are excluded from amortized cost in the tables above.

The number of held to maturity debt securities in an unrealized loss position at March 31, 2023 totaled 297 , compared with 439 at December 31, 2022.

The decline in the number of securities in an unrealized loss position at March 31, 2023, was due to lower current market treasury rates compared to rates at December 31, 2022.

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

The number of held to maturity debt securities in an unrealized loss position at June 30, 2023 totaled 473 , compared with 439 at December 31, 2022.

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

Management measures expected credit losses on held to maturity debt securities on a collective basis by security type.

Management classifies the held to maturity debt securities portfolio into the following security types:

• Agency obligations;

• Mortgage-backed securities;

• State and municipal obligations;

• 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 credit ratings from the rating agencies at June 30, 2023 no lower than A and the Company had no securities rated BBB or worse by Moody’s Investors Service.

Credit Quality Indicators.

The following table provides the amortized cost of held to maturity debt securities by credit rating as of March 31, 2023 (in thousands):

March 31, 2023

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

June 30, 2023

Total Portfolio AAA AA A BBB Not Rated Total

10 unchanged sentences

Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities.

At March 31, 2023, the held to maturity debt securities portfolio was comprised of 16 % rated AAA, 45 % rated AA, 39 % rated A, and less than 1 % either

below an A rating or not rated by Moody’s Investors Service or Standard and Poor’s.

At June 30, 2023, the held to maturity debt securities portfolio was comprised of 16 % rated AAA, 45 % rated AA, 39 % rated A, and less than 1 % either below an A rating or not rated by Moody’s Investors Service or Standard and Poor’s.

Securities not explicitly rated, such as U.S.

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Loans Receivable and Allowance for Credit Losses

Loans receivable at March 31, 2023 and December 31, 2022 are summarized as follows (in thousands):

March 31, 2023 December 31, 2022

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

June 30, 2023 December 31, 2022

Mortgage loans:

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Premiums on purchased loans 1,374 1,380

Net deferred fees and unearned discounts ( 13,116 ) ( 14,142 )

Net deferred fees ( 13,195 ) ( 14,142 )

Total loans $ 10,530,531 10,248,883

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

March 31, 2023

June 30, 2023

30-59 Days 60-89 Days Non-accrual Recorded

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Due Current Total Loans

Receivable Non-accrual loans with no specific allowance

Receivable Non-accrual loans with no related allowance

Mortgage loans:

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accruing Total Past

Due Current Total Loans Receivable Non-accrual loans with no specific allowance

Due Current Total Loans Receivable Non-accrual loans with no related allowance

Mortgage loans:

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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 $ 35.5 million and $ 58.5 million at March 31, 2023 and December 31, 2022, respectively.

Included in non-accrual loans were $ 11.9 million and $ 42.9 million of loans which were less than 90 days past due at March 31, 2023 and December 31, 2022, respectively.

There were no loans 90 days or greater past due and still accruing interest at March 31, 2023 and December 31, 2022.

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 activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2023 and 2022 was as follows (in thousands):

Three months ended March 31, Mortgage loans Commercial loans Consumer loans Total

The principal amounts of these non-accrual loans were $ 45.9 million and $ 58.5 million at June 30, 2023 and December 31, 2022, respectively.

Included in non-accrual loans were $ 17.4 million and $ 42.9 million of loans which were less than 90 days past due at June 30, 2023 and December 31, 2022, respectively.

There were no loans 90 days or greater past due and still accruing interest at June 30, 2023 and December 31, 2022.

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

Three months ended June 30, Mortgage loans Commercial loans Consumer loans Total

Balance at beginning of period $ 63,195 27,117 2,446 92,758

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

Recoveries of loans previously charged-off 3 134 173 310

Loans charged-off — ( 1,313 ) ( 82 ) ( 1,395 )

Balance at end of period $ 69,940 29,707 2,426 102,073

Balance at beginning of period $ 50,096 23,799 2,380 76,275

Provision charge (benefit) to operations 5,593 ( 2,710 ) 117 3,000

Recoveries of loans previously charged-off 361 443 109 913

Loans charged-off ( 986 ) ( 145 ) ( 41 ) ( 1,172 )

Balance at end of period $ 55,064 21,387 2,565 79,016

Six months ended June 30, Mortgage loans Commercial loans Consumer loans Total

Balance at beginning of period $ 58,218 27,413 2,392 88,023

Cumulative effect of adopting Accounting Standards Update ("ASU") No.

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Balance at beginning of period $ 52,104 26,343 2,293 80,740

Provision benefit to operations ( 1,995 ) ( 4,404 ) ( 1 ) ( 6,400 )

Provision charge (benefit) charge to operations 3,599 ( 7,115 ) 116 ( 3,400 )

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

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Balance at end of period $ 55,064 21,387 2,565 79,016

For the three months ended March 31, 2023, the Company recorded a $ 6.0 million provision for credit losses on loans, compared to a $ 6.4 million benefit for credit losses for the same period in 2022.

The increase in provision was attributable to a worsening economic forecast and related deterioration in the projected commercial property price index over the expected life of the loan portfolio.

The following table summarizes the Company's gross charge-offs recorded during the three months ended March 31, 2023 by year of origination (in thousands):

For the three and six months ended June 30, 2023, the Company recorded a $ 10.4 million and a $ 16.4 million provision for credit losses on loans, respectively.

The increase in provision was attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices over the expected life of the loan portfolio within our CECL model.

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

2023 2022 2021 2020 2019 Prior to 2019 Total Loans

Commercial loans $ — — — — — 1,313 1,313

Consumer loans (1)

4 — — — — 3 7

Total gross loans $ 4 — — — — 1,316 1,320

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

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

2023 2022 2021 2020 2019 Prior to 2019 Total Loans

Mortgage loans:

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Total gross loans $ 9 — — — — 2,166 2,175

(1) During the three months ended March 31, 2023, charge-offs on consumer overdraft accounts totaled $ 72,000 , which is not included in the table above.

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.

At March 31, 2023, there were 15 impaired loans totaling $ 27.5 million, compared to 10 impaired loans totaling $ 42.8 million at December 31, 2022.

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

The Company defines a loan individually evaluated for impairment as a non-homogeneous loan greater than $ 1.0 million, for which, based on current information, it is not expected to collect all amounts due under the contractual terms of the loan agreement.

At June 30, 2023, there were 17 loans totaling $ 37.1 million, compared to 10 loans totaling $ 42.8 million at December 31, 2022, that were individually evaluated for impairment.

A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral.

For all classes of loans deemed collateral-dependent, the

Company estimates expected credit losses based on the collateral’s fair value less any selling costs.

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.

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The Company believes there have been no significant time lapses resulting from this process.

At March 31, 2023 and December 31, 2022, the fair value of the assets securing collateral-dependent impaired loans totaled $ 5.2 million and $ 24.0 million, respectively.

These collateral-dependent impaired loans at March 31, 2023 consisted of $ 5.2 million in commercial loans.

At June 30, 2023 and December 31, 2022, the Company had $ 14.6 million and $ 24.0 million related to the fair value of collateral-dependent loans individually evaluated for impairment, respectively.

These loans at June 30, 2023 consisted of $ 14.6 million in commercial loans.

Loan modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearance, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.

In addition, management attempts to obtain additional collateral or guarantor support when modifying such loans.

If the borrower has demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest.

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

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As a result, The Company recorded a $ 594,000 reduction to the allowance for credit losses, which resulted in a $ 433,000 cumulative effect adjustment increase, net of tax to retained earnings.

The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023 (in thousands):

As of March 31, 2023

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

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

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

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

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023 (in thousands):

As of March 31, 2023

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

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

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Total gross loans 10 0.28 %

There were no loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023, that subsequently defaulted.

The following table presents the aging analysis of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2023 (in thousands):

As of March 31, 2023

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

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

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

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Effective January 1, 2023, we adopted ASU 2022-02, which eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023.

There were no loans modified as TDRs during the three months ended March 31, 2022.

During the three months ended March 31, 2022, no charge-offs were recorded on collateral-dependent impaired loans.

There were no loans which had a payment default (90 days or more past due) for loans modified as TDRs within the 12 month period ending March 31, 2022.

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.

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

For the three and six months ended

June 30, 2022

Troubled Debt Restructurings Number of

Loans Pre-Modification

Investment Post-Modification

Recorded Investment

Mortgage loans:

Residential 2 $ 265 206

Multi Family 1 1,618 1,601

Total mortgage loans 3 1,883 1,807

Commercial loans 2 378 274

Total restructured loans 5 $ 2,261 2,081

Durin g the three and six months ended June 30, 2022, $ 921,000 of charge-offs were recorded on collateral-dependent impaired loans.

There was one loan totaling $ 209,000 which had a payment default (90 days or more past due) for a loan modified as a TDR within the 12 month period ending June 30, 2023.

For TDRs that subsequently defaulted, the Company determined the amount of the allowance for the respective loans in accordance with the accounting policy for the allowance for credit losses on loans individually evaluated for impairment.

As allowed by CECL, loans acquired by the Company that experience more-than-insignificant deterioration in credit quality after origination, are classified as Purchased Credit Deteriorated ("PCD") loans.

At March 31, 2023, the balance of PCD loans totaled $ 176.8 million with a related allowance for credit losses of $ 1.6 million.

At June 30, 2023, the balance of PCD loans totaled $ 173.3 million with a related allowance for credit losses of $ 1.6 million.

The balance of PCD loans at December 31, 2022 was $ 193.0 million with a related allowance for credit losses of $ 1.7 million.

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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.

The risk ratings are also reviewed periodically through loan review examinations which are currently performed by an independent third-party.

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

The Company participated in the Paycheck Protection Program (“PPP”) through the United States Department of the Treasury and Small Business Administration.

PPP loans were fully guaranteed by the SBA and were eligible for forgiveness by the SBA to the extent that the proceeds were used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan was made as long as certain conditions were met regarding employee retention and compensation levels.

to 24 weeks after the loan was made as long as certain conditions were met regarding employee retention and compensation levels.

PPP loans deemed eligible for forgiveness by the SBA are to be repaid by the SBA to the Company.

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Under the PPP, the Company secured 2,067 PPP loans for its customers totaling $ 682.0 million.

As of March 31, 2023, 2,054 PPP loans totaling $ 679.3 million were forgiven and repaid by the SBA.

The balance of PPP loans at March 31, 2023 was $ 2.7 million.

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, 2023 and December 31, 2022 (in thousands):

As of June 30, 2023, 2,054 PPP loans totaling $ 679.4 million were forgiven and repaid by the SBA.

The balance of PPP loans at June 30, 2023 was $ 2.6 million.

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