PROVIDENT FINANCIAL SERVICES INC 10-K

Item 8. Financial Statements and Supplementary Data The following are included in this item: A. Report of Independent Registered Public Accounting Firm B. Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting C. Consolidated Financial Statements: (1) Consolidated Statements of Financial Condition as of December 31, 2023 and 2022 (2) Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021 (3) Consolidated Statements of Comprehensive Income for the years ended December 31, 2023, 2022 and 2021 (4) Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023, 2022 and 2021 (5) Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 (6) Notes to Consolidated Financial Statements D. Provident Financial Services, Inc., Condensed Financial Statements: (1) Condensed Statement of Financial Condition as of December 31, 2023 and 2022 (2) Condensed Statement of Income for the years ended December 31, 2023, 2022 and 2021 (3) Condensed Statement of Cash Flows for the years ended December 31, 2023, 2022 and 2021 The supplementary data required by this Item is provided in Note 20 of the Notes to Consolidated Financial Statements. 71 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Provident Financial Services, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated statements of financial condition of Provident Financial Services, Inc. and subsidiary (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assessment of the allowance for credit losses on loans evaluated on a collective basis As discussed in Notes 1 and 7 to the consolidated financial statements, the Company’s allowance for credit losses on loans evaluated on a collective basis (the collective ACL on loans) was $104.3 million of a total allowance for credit losses of $107.2 million as of December 31, 2023. The collective ACL on loans includes the measure of expected credit losses on a collective basis for loans that share similar risk characteristics. The Company uses a discounted cash flow methodology where the respective quantitative allowance for each loan segment is measured by comparing the present value of expected principal and interest cash flows projected using an econometric, probability of default (PD) and loss given default (LGD) modeling methodology to the amortized cost. Historical credit loss experience for both the Company and peers provides the basis for the estimation of expected credit losses, where observed credit losses are converted to probability of default rate curves using segment-specific loss given default risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment. Using the historical relationship between the economic conditions and loan performance, management’s expectation of future loan performance is 72 incorporated using an externally developed economic forecast that is applied over a period that has been determined to be reasonable and supportable. After the reasonable and supportable forecast period, the Company reverts to the long-term average of selected economic factors on a straight-line basis over a reversion period. Contractual cash flows over the contractual life of the loans are the basis for modeled cash flows, adjusted for modeled defaults and expected prepayments and discounted at the loan-level effective interest rate. The Company considers qualitative adjustments to credit loss estimates for information not already captured in the quantitative component of the loss estimation process. We identified the assessment of the collective ACL on loans as a critical audit matter. A high degree of audit effort, including specialized skills and knowledge, and subjective and complex auditor judgment was involved in the assessment of the collective ACL on loans due to significant measurement uncertainty. Specifically, the assessment encompassed the evaluation of the collective ACL on loans methodology, including the methods and models used to estimate (1) the PD and LGD and their significant assumptions, including the selected external economic forecast and macroeconomic factors, and (2) certain qualitative adjustments and their significant assumptions. The assessment also included an evaluation of the conceptual soundness of the PD and LGD models. In addition, auditor judgment was required to evaluate the sufficiency of audit evidence obtained. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s measurement of the collective ACL on loans estimate, including controls over the: • evaluation of the collective ACL on loans methodology • performance monitoring of the PD and LGD models • identification and determination of the significant assumptions used in the PD and LGD models • development of the qualitative adjustments, including the significant assumptions used in the measurement of the qualitative adjustments • analysis of the collective ACL on loan results, trends and ratios. We evaluated the Company’s process to develop the collective ACL on loans estimate by testing certain sources of data and assumptions that the Company used and considered the relevance and reliability of such data and assumptions. In addition, we involved credit risk professionals with specialized skills and knowledge, who assisted in: • evaluating the Company’s collective ACL on loans methodology for compliance with U.S. generally accepted accounting principles • evaluating judgments made by the Company relative to the development and performance monitoring of the PD and LGD models by comparing them to relevant Company-specific metrics and trends and the applicable industry and regulatory practices • assessing the conceptual soundness and design of the PD and LGD models by inspecting the Company’s model documentation to determine whether the models are suitable for their intended use • assessing the selected economic forecast and macroeconomic variables used by comparing it to the Company’s business environment and relevant industry practices • evaluating the methodology used to develop the qualitative adjustments and the effect of those adjustments on the collective ACL on loans compared with relevant credit risk factors and consistency with credit trends and identified limitations of the underlying quantitative model. We also evaluated the cumulative results of the procedures performed to assess the sufficiency of the audit evidence obtained related to the collective ACL on loans by evaluating the: • cumulative results of the audit procedures • qualitative aspects of the Company’s accounting practices • potential bias in the accounting estimate. /s/ KPMG LLP We have not been able to determine the specific year that we began serving as the Company’s auditor; however, we are aware that we have served as the Company’s auditor since at least 1997. Short Hills, New Jersey February 28, 2024 73 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Provident Financial Services, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Provident Financial Services, Inc. and subsidiary's (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial condition of the Company as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2024 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Short Hills, New Jersey February 28, 2024 74 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Financial Condition December 31, 2023 and 2022 (Dollars in Thousands, except share data) December 31, 2023 December 31, 2022 ASSETS Cash and due from banks $ 180,241 $ 186,490 Short-term investments 14 18 Total cash and cash equivalents 180,255 186,508 Available for sale debt securities, at fair value 1,690,112 1,803,548 Held to maturity debt securities, net (fair value of $ 352,601 and $ 373,468 as of December 31, 2023 and December 31, 2022, respectively). 363,080 387,923 Equity securities, at fair value 1,270 1,147 Federal Home Loan Bank stock 79,217 68,554 Loans 10,873,701 10,248,883 Less allowance for credit losses 107,200 88,023 Net loans 10,766,501 10,160,860 Foreclosed assets, net 11,651 2,124 Banking premises and equipment, net 70,998 79,794 Accrued interest receivable 58,966 51,903 Intangible assets 457,942 460,892 Bank-owned life insurance 243,050 239,040 Other assets 287,768 341,143 Total assets $ 14,210,810 $ 13,783,436 LIABILITIES AND STOCKHOLDERS’ EQUITY Deposits: Demand deposits $ 8,020,889 $ 8,373,005 Savings deposits 1,175,683 1,438,583 Certificates of deposit of $250 thousand or more 218,549 108,176 Other time deposits 877,393 643,260 Total deposits 10,292,514 10,563,024 Mortgage escrow deposits 36,838 35,705 Borrowed funds 1,970,033 1,337,370 Subordinated debentures 10,695 10,493 Other liabilities 210,134 239,141 Total liabilities 12,520,214 12,185,733 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 75,537,186 shares outstanding as of December 31, 2023, and 75,169,196 shares outstanding as of December 31, 2022 832 832 Additional paid-in capital 989,058 981,138 Retained earnings 974,542 918,158 Accumulated other comprehensive (loss) income, net of tax ( 141,115 ) ( 165,045 ) Treasury stock ( 127,825 ) ( 127,154 ) Unallocated common stock held by the Employee Stock Ownership Plan ( 4,896 ) ( 10,226 ) Common stock acquired by deferred compensation plans ( 2,694 ) ( 3,427 ) Deferred compensation plans 2,694 3,427 Total stockholders’ equity 1,690,596 1,597,703 Total liabilities and stockholders’ equity $ 14,210,810 $ 13,783,436 See accompanying notes to consolidated financial statements. 75 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Income Years Ended December 31, 2023, 2022 and 2021 (Dollars in Thousands, except share data) Years ended December 31, 2023 2022 2021 Interest and dividend income: Real estate secured loans $ 408,942 $ 304,321 $ 252,336 Commercial loans 128,854 98,961 99,163 Consumer loans 18,439 14,368 13,574 Available for sale debt securities and Federal Home Loan Bank stock 46,790 36,619 23,798 Held to maturity debt securities 9,362 9,894 10,743 Deposits, federal funds sold and other short-term investments 3,433 2,018 2,725 Total interest and dividend income 615,820 466,181 402,339 Interest expense: Deposits 159,459 38,704 26,513 Borrowed funds 55,856 9,310 8,614 Subordinated debentures 1,051 615 1,189 Total interest expense 216,366 48,629 36,316 Net interest income 399,454 417,552 366,023 Provision charge (benefit) for credit losses 27,904 8,388 ( 24,339 ) Net interest income after provision for credit losses 371,550 409,164 390,362 Non-interest income: Fees 24,396 28,128 29,967 Wealth management income 27,669 27,870 30,756 Insurance agency income 13,934 11,440 10,216 Bank-owned life insurance 6,482 5,988 7,930 Net gain on securities transactions 30 181 255 Other income 7,318 14,182 7,685 Total non-interest income 79,829 87,789 86,809 Non-interest expense: Compensation and employee benefits 148,497 147,203 143,366 Net occupancy expense 32,271 34,566 32,932 Data processing expense 22,993 21,729 19,755 FDIC Insurance 8,578 5,195 6,260 Advertising and promotion expense 4,822 5,191 3,951 Credit loss expense (benefit) for off-balance sheet credit exposures 264 ( 3,384 ) 1,515 Amortization of intangibles 2,952 3,292 3,664 Merger-related expenses 7,826 4,128 — Other operating expenses 47,397 38,927 38,610 Total non-interest expense 275,600 256,847 250,053 Income before income tax expense 175,779 240,106 227,118 Income tax expense 47,381 64,458 59,197 Net income $ 128,398 $ 175,648 $ 167,921 Basic earnings per share $ 1.72 $ 2.35 $ 2.20 Average basic shares outstanding 74,844,489 74,700,623 76,471,933 Diluted earnings per share $ 1.71 $ 2.35 $ 2.19 Average diluted shares outstanding 74,873,256 74,782,370 76,560,840 See accompanying notes to consolidated financial statements. 76 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Comprehensive Income Years Ended December 31, 2023, 2022 and 2021 (Dollars in Thousands) Years ended December 31, 2023 2022 2021 Net income $ 128,398 $ 175,648 $ 167,921 Other comprehensive (loss) income, net of tax: Unrealized gains and losses on available for sale debt securities: Net unrealized (losses) gains arising during the period 32,125 ( 186,361 ) ( 23,730 ) Reclassification adjustment for gains included in net income — ( 42 ) ( 171 ) Total 32,125 ( 186,403 ) ( 23,901 ) Unrealized gains (losses) on derivatives designated as cash flow hedges: Net unrealized (losses) gains arising during the period 2,388 19,201 6,169 Reclassification adjustment for gains included in net income ( 12,948 ) ( 3,297 ) 2,878 Total ( 10,560 ) 15,904 9,047 Amortization related to post-retirement obligations 2,365 ( 1,409 ) 4,062 Total other comprehensive (loss) income, net of tax 23,930 ( 171,908 ) ( 10,792 ) Total comprehensive income $ 152,328 $ 3,740 $ 157,129 See accompanying notes to consolidated financial statements. 77 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021 (Dollars in Thousands ) COMMON STOCK ADDITIONAL PAID-IN CAPITAL RETAINED EARNINGS ACCUMULATED OTHER COMPREHENSIVE INCOME TREASURY STOCK UNALLOCATED ESOP SHARES COMMON STOCK ACQUIRED BY DEFERRED COMP PLANS DEFERRED COMPENSATION PLANS TOTAL STOCKHOLDERS’ EQUITY Balance as of December 31, 2020 $ 832 $ 962,453 $ 718,090 $ 17,655 $ ( 59,018 ) $ ( 20,215 ) $ ( 4,549 ) $ 4,549 $ 1,619,797 Net income — — 167,921 — — — — — 167,921 Other comprehensive income, net of tax — — — ( 10,792 ) — — — — ( 10,792 ) Cash dividends paid ($ 0.92 per share) — — ( 71,478 ) — — — — — ( 71,478 ) Distributions from deferred comp plans — 154 — — — — 565 ( 565 ) 154 Purchases of treasury stock — — — — ( 20,711 ) — — — ( 20,711 ) Purchase of employee restricted shares to fund statutory tax withholding — — — — ( 961 ) — — — ( 961 ) Option exercises — ( 200 ) — — 1,087 — — — 887 Allocation of Employee Stock Ownership Plan ("ESOP") shares — 1,757 — — — 4,871 — — 6,628 Allocation of Stock Award Plan ("SAP") shares — 5,451 — — — — — — 5,451 Allocation of stock options — 200 — — — — — — 200 Balance as of December 31, 2021 $ 832 $ 969,815 $ 814,533 $ 6,863 $ ( 79,603 ) $ ( 15,344 ) $ ( 3,984 ) $ 3,984 $ 1,697,096 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY 78 Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021 (Continued) (Dollars in Thousands) 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 as of December 31, 2021 $ 832 $ 969,815 $ 814,533 $ 6,863 $ ( 79,603 ) $ ( 15,344 ) $ ( 3,984 ) $ 3,984 $ 1,697,096 Net income — — 175,648 — — — — — 175,648 Other comprehensive loss, net of tax — — — ( 171,908 ) — — — — ( 171,908 ) Cash dividends paid ($ 0.94 per share) — — ( 72,023 ) — — — — — ( 72,023 ) Distributions from deferred comp plans — 176 — — — — 557 ( 557 ) 176 Purchases of treasury stock — — — — ( 46,530 ) — — — ( 46,530 ) Purchase of employee restricted shares to fund statutory tax withholding — — — — ( 1021 ) — — — ( 1,021 ) Option exercises — — — — — — — — — Allocation of ESOP shares — 1,542 — — — 5,118 — — 6,660 Allocation of SAP shares — 9,407 — — — — — — 9,407 Allocation of stock options — 198 — — — — — — 198 Balance as of December 31, 2022 $ 832 $ 981,138 $ 918,158 $ ( 165,045 ) $ ( 127,154 ) $ ( 10,226 ) $ ( 3,427 ) $ 3,427 $ 1,597,703 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY 79 Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2023, 2022 and 2021 (Continued) (Dollars in Thousands) 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 as of December 31, 2022 $ 832 $ 981,138 $ 918,158 $ ( 165,045 ) $ ( 127,154 ) $ ( 10,226 ) $ ( 3,427 ) $ 3,427 $ 1,597,703 Net income — — 128,398 — — — — — 128,398 Other comprehensive loss, net of tax — — — 23,930 — — — — 23,930 Cash dividends paid ($ 0.96 per share) — — ( 72,447 ) — — — — — ( 72,447 ) Cumulative effect of adopting Accounting Standards Update ("ASU") No. 2022-02, net of tax — — 433 — — — — — 433 Distributions from deferred comp plans — 152 — — — — 733 ( 733 ) 152 Purchases of treasury stock — — — — — — — — — Purchase of employee restricted shares to fund statutory tax withholding — — — — ( 1,678 ) — — — ( 1,678 ) Option exercises — ( 217 ) — — 1,007 — — — 790 Allocation of ESOP shares — 272 — — — 5,330 — — 5,602 Allocation of SAP shares — 7,569 — — — — — — 7,569 Allocation of stock options — 144 — — — — — — 144 Balance as of December 31, 2023 $ 832 $ 989,058 $ 974,542 $ ( 141,115 ) $ ( 127,825 ) $ ( 4,896 ) $ ( 2,694 ) $ 2,694 $ 1,690,596 See accompanying notes to consolidated financial statements. 80 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows Years Ended December 31, 2023, 2022 and 2021 (Dollars in Thousands) Years Ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income $ 128,398 $ 175,648 $ 167,921 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 11,695 13,076 12,656 Provision charge (benefit) for credit losses on loans and securities 27,904 8,388 ( 24,339 ) Provision charge (benefit) for credit losses on off-balance sheet credit exposures 264 ( 3,384 ) 1,515 Deferred tax expense 2,725 2,220 12,413 Amortization of operating lease right-of-use assets 10,495 10,617 10,074 Income on Bank-owned life insurance ( 6,482 ) ( 5,988 ) ( 7,930 ) Net amortization of premiums and discounts on securities 8,326 12,673 15,841 Accretion of net deferred loan fees ( 8,724 ) ( 9,262 ) ( 7,763 ) Amortization of premiums on purchased loans, net 206 270 604 Originations of loans held for sale ( 19,371 ) ( 22,295 ) ( 47,675 ) Proceeds from sales of loans originated for sale 22,895 20,521 49,530 ESOP expense 3,086 4,140 4,318 Allocation of stock award shares 7,569 9,407 5,451 Allocation of stock options 144 198 200 Net gain on sale of loans ( 2,019 ) ( 1,515 ) ( 1,855 ) Net gain on securities transactions ( 30 ) ( 181 ) ( 255 ) Net loss (gain) on sale of premises and equipment 154 ( 22 ) ( 42 ) Net gain on sale of foreclosed assets ( 2,854 ) ( 8,541 ) ( 461 ) Net change in balance sheet: (Increase) decrease in accrued interest receivable ( 7,063 ) ( 9,913 ) 4,460 Decrease (increase) in other assets 25,085 ( 56,291 ) 10,264 (Decrease) increase in other liabilities ( 29,007 ) 60,544 ( 48,113 ) Net cash provided by operating activities 173,396 200,310 156,814 Cash flows from investing activities: Net (increase) decrease in loans ( 625,691 ) ( 649,216 ) 253,221 Proceeds from sales of loans held for investment 2,017 — — Proceeds from sales of foreclosed assets 4,340 16,155 1,368 Proceeds from maturities, calls and paydowns of investment securities held to maturity 40,816 73,841 47,637 Purchases of investment securities held to maturity ( 17,099 ) ( 27,043 ) ( 34,599 ) Proceeds from sales of securities available for sale — — 9,442 Proceeds from maturities calls and paydowns of securities available for sale 189,542 278,779 393,173 Purchases of securities available for sale ( 40,089 ) ( 290,426 ) ( 1,400,980 ) Proceeds from redemption of Federal Home Loan Bank stock 212,527 162,987 30,870 Purchases of Federal Home Loan Bank stock ( 223,190 ) ( 197,251 ) ( 5,671 ) BOLI claim benefits received 3,873 970 7,964 Purchases of loans ( 9,263 ) ( 6,971 ) ( 5,230 ) Proceeds from sales of premises and equipment 105 22 42 Purchases of premises and equipment ( 7,488 ) ( 9,411 ) ( 13,805 ) Net cash used in investing activities ( 469,600 ) ( 647,564 ) ( 716,568 ) Cash flows from financing activities: Net (decrease) increase in deposits ( 270,510 ) ( 670,988 ) 1,396,183 Increase in mortgage escrow deposits 1,133 1,265 142 Purchase of treasury stock — ( 46,530 ) ( 20,711 ) Purchase of employee restricted shares to fund statutory tax withholding ( 1,678 ) ( 1,021 ) ( 961 ) Cash dividends paid to stockholders ( 72,447 ) ( 72,023 ) ( 71,478 ) Stock options exercised 790 — 887 Proceeds from long-term borrowings 534,807 3,982,100 913,685 Repayments of long-term borrowings ( 58,443 ) ( 3,252,556 ) ( 1,454,440 ) Net increase (decrease) in short-term borrowings 156,299 ( 18,948 ) ( 8,443 ) Repayment of subordinated debentures — — ( 15,000 ) Net cash provided by (used in) financing activities 289,951 ( 78,701 ) 739,864 Net (decrease) increase in cash and cash equivalents ( 6,253 ) ( 525,955 ) 180,110 Cash and cash equivalents at beginning of period 186,438 685,163 418,053 Restricted cash at beginning of period 70 27,300 114,300 Total cash, cash equivalents and restricted cash at beginning of period 186,508 712,463 532,353 Cash and cash equivalents at end of period 180,185 186,438 685,163 Restricted cash at end of period 70 70 27,300 Total cash, cash equivalents and restricted cash at end of period $ 180,255 186,508 712,463 Cash paid during the period for: Interest on deposits and borrowings $ 210,345 46,896 35,910 Income taxes $ 46,461 51,050 57,471 Non cash investing activities: Transfer of loans receivable to foreclosed assets $ 15,131 1,208 434 See accompanying notes to consolidated financial statements. 81 PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Provident Financial Services, Inc. (the “Company”), Provident Bank (the “Bank”) and their wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made in the consolidated financial statements to conform with current year classifications. Business The Company, through the Bank, provides a full range of banking services to individual and business customers through branch offices in New Jersey, Queens and Nassau Counties, New York and eastern Pennsylvania. The Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies, and undergoes periodic examinations by those regulatory authorities. Basis of Financial Statement Presentation The consolidated financial statements of the Company have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). In preparing the consolidated financial statements, management is required to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities and disclosures about contingent assets and liabilities as of the dates of the consolidated statements of financial condition, and revenues and expenses for the periods then ended. Such estimates are used in connection with the determination of the allowance for credit losses, evaluation of goodwill for impairment, evaluation of the need for valuation allowances on deferred tax assets, and determination of liabilities related to retirement and other post-retirement benefits, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the currently forecasted economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates will be reflected in the financial statements in future periods. Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, Federal funds sold and commercial paper with original maturity dates less than 90 days. Securities Securities include held to maturity debt securities and available for sale debt securities. The available for sale debt securities portfolio is carried at estimated fair value, with any unrealized gains or losses, net of taxes, reported as accumulated other comprehensive income or loss in Stockholders’ Equity. Estimated fair values are provided by reputable and widely used pricing services who maintain pricing methodologies appropriate for varying security classes using valuation techniques that are in accordance with GAAP. Securities which the Company has the positive intent and ability to hold to maturity are classified as held to maturity debt securities and carried at amortized cost. On January 1, 2020, the Company adopted the current expected credit loss ("CECL") methodology which replaces the incurred loss methodology with an expected loss methodology. 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. 82 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 as of December 31, 2023 and the Company had no securities rated BBB or worse by Moody’s Investors Service. Premiums on securities are amortized into income using a method that approximates the interest method over the remaining period to the earliest call date or contractual maturity, adjusted for anticipated prepayments. Discounts on securities are accreted into income over the remaining period to the contractual maturity, adjusted for anticipated prepayments. Interest income is recognized on an accrual basis, while dividend income is recognized when earned. Realized gains and losses are recognized when securities are sold or called based on the specific identification method. Accrued interest receivable on held to maturity debt securities are excluded from the estimate of credit losses. See Note 3 for additional information on investment securities. Equity Securities The Company holds equity securities that are traded in active markets with readily determinable fair value using quoted market prices. Fair Value of Financial Instruments 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). 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. Federal Home Loan Bank of New York Stock The Bank, as a member of the Federal Home Loan Bank of New York (“FHLBNY”), is required to hold shares of capital stock of the FHLBNY at cost based on a specified formula. The Bank carries this investment at cost, which approximates fair value. Loans Loans receivable are carried at unpaid principal balances plus unamortized premiums, purchase accounting mark-to-market adjustments and certain deferred loan origination costs, less certain deferred direct loan origination fees, unaccreted discounts, and the allowance for credit losses. The Bank defers loan origination fees and certain direct loan origination costs and accretes or amortizes such amounts as an adjustment to the yield over the contractual lives of the related loans using the interest method. Premiums and discounts on loans purchased are amortized or accreted as an adjustment of yield over the contractual lives of the related loans, adjusted for prepayments when applicable, using the effective interest method. Loans are generally placed on non-accrual status when they are past due 90 days or more as to contractual obligations or when other circumstances indicate that collection is questionable. When a loan is placed on non-accrual status, any interest accrued but not received is reversed against interest income. Payments received on a non-accrual loan are either applied to the outstanding principal balance or recorded as interest income, depending on an assessment of the ability to collect the loan. A non-accrual loan is restored to accrual status when principal and interest payments become less than 90 days past due and its future collectability is reasonably assured. An impaired loan is defined as a loan for which it is probable, based on current information, that the Bank will not collect all amounts due under the contractual terms of the loan agreement. Impaired loans are individually assessed to determine that each loan’s carrying value is not in excess of the fair value of the related collateral or the present value of the expected future cash flows. Residential mortgage and consumer loans are deemed smaller balance homogeneous loans which are evaluated collectively for impairment and are therefore excluded from the population of impaired loans. Purchased credit deteriorated (“PCD”) loans are loans acquired that have experienced more-than-insignificant deterioration in credit quality since origination. 83 Allowance for Credit Losses on Loans On January 1, 2020, the Company adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments,” which replaced the incurred loss methodology with the CECL methodology. The allowance for credit losses is a valuation account that reflects management’s evaluation of the current expected credit losses in the loan portfolio. The Company maintains the allowance for credit losses through provisions for credit losses that are charged to income. Charge-offs against the allowance for credit losses are taken on loans where management determines that the collection of loan principal and interest is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for credit losses. The allowance for credit losses is a valuation account that reflects management’s evaluation of the current expected credit losses in the loan portfolio. The Company maintains the allowance for credit losses through provisions for credit losses that are charged to income. Charge-offs against the allowance for credit losses are taken on loans where management determines that the collection of loan principal and interest is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for credit losses. The calculation of the allowance for credit losses is a critical accounting policy of the Company. Management estimates the allowance using relevant available information, from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience for both the Company and peers provides the basis for the estimation of expected credit losses, where observed credit losses are converted to probability of default rate (“PDR”) curves through the use of segment-specific loss given default (“LGD”) risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment, primarily due to the nature of the underlying collateral. These risk factors were assessed for reasonableness against the Company’s own loss experience and adjusted in certain cases when the relationship between the Company’s historical default and loss severity deviate from that of the wider industry. The historical PDR curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle. Using the historical relationship between economic conditions and loan performance, management’s expectation of future loan performance is incorporated using an externally developed economic forecast. This forecast is applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model will revert to long-term average economic conditions using a straight-line, time-based methodology. The Company's current forecast period is six quarters, with a four-quarter reversion period to historical average macroeconomic factors. The Company's economic forecast is approved by the Company's Allowance for Credit Loss ("ACL") Committee. The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a quarterly basis, when similar risk characteristics exist. The respective quantitative allowance for each loan segment is measured using an econometric, discounted PDR/LGD modeling methodology in which distinct, segment-specific multi-variate regression models are applied to an external economic forecast. Under the discounted cash flows methodology, expected credit losses are estimated over the effective life of the loans by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for modeled cash flows, adjusted for modeled defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies at the reporting date: management has a reasonable expectation that a modification will be executed with an individual borrower; or when an extension or renewal option is included in the original contract and is not unconditionally cancellable by the Company. Management will assess the likelihood of the option being exercised by the borrower and appropriately extend the maturity for modeling purposes. The Company considers qualitative adjustments to credit loss estimates for information not already captured in the quantitative component of the loss estimation process. Qualitative factors are based on portfolio concentration levels, model imprecision, changes in industry conditions, changes in the Company’s loan review process, changes in the Company’s loan policies and procedures, and economic forecast uncertainty. One of the most significant judgments involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period. As of December 31, 2023, the model incorporated Moody’s baseline economic forecast, as adjusted for qualitative factors, as well as an extensive review of classified loans and loans that were classified as impaired with a specific reserve assigned to those loans. This baseline outlook reflected a worsened economic forecast and related deterioration in the projected commercial property price index used in our CECL model. The Company made qualitative adjustments to the projected commercial real estate property price index, 84 considering the differences in portfolio collateral composition versus the commercial property price index used in our CECL models. This resulted in a total provision of $ 27.9 million for the year ended December 31, 2023, and an overall coverage ratio of 99 basis points. If the Company used the unadjusted baseline outlooks for the commercial property price index over the expected lives of Commercial Real Estate Non-Owner Occupied and Owner-Occupied loan portfolios, the provision would have risen by $6.5 million, leading to an overall coverage ratio of 105 basis points. Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed segments for estimating loss based on type of borrower and collateral which is generally based upon federal call report segmentation. The segments have been combined or sub-segmented as needed to ensure loans of similar risk profiles are appropriately pooled. As of December 31, 2023, the portfolio and class segments for the Company’s loan portfolio were: • Mortgage Loans – Residential, Commercial Real Estate, Multi-Family and Construction • Commercial Loans – Commercial Owner-Occupied and Commercial Non-Owner Occupied • Consumer Loans – First Lien Home Equity and Other Consumer The allowance for credit losses on loans individually evaluated for impairment is based upon loans that have been identified through the Company’s normal loan monitoring process. This process includes the review of delinquent and problem loans at the Company’s Delinquency, Credit, Credit Risk Management and Allowance Committees; or which may be identified through the Company’s loan review process. Generally, the Company only evaluates loans individually for impairment if the loan is non-accrual, non-homogeneous and the balance is greater than $1.0 million. In instances where the loan is under $1.0 million, but part of a relationship over $1.0 million, all loans in the relationship would be evaluated individually for impairment. For all classes of loans deemed collateral-dependent, the Company estimates expected credit losses based on the fair value of the collateral less any selling costs. If the loan is not collateral dependent, the allowance for credit losses related to individually assessed loans is based on discounted expected cash flows using the loan’s initial effective interest rate. For loans acquired that have experienced more-than-insignificant deterioration in credit quality since their origination are considered PCD loans. The Company evaluates acquired loans for deterioration in credit quality based on any of, but not limited to, the following: (1) non-accrual status; (2) modification designation; (3) risk ratings of special mention, substandard or doubtful; (4) watchlist credits; and (5) delinquency status, including loans that are current on acquisition date, but had been previously delinquent. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. Subsequent to the acquisition date, the initial allowance for credit losses on PCD loans will increase or decrease based on future evaluations, with changes recognized in the provision for credit losses. Management believes the primary risks inherent in the portfolio are a general decline in the economy, a decline in real estate market values, rising unemployment or a protracted period of elevated unemployment, increasing vacancy rates in commercial investment properties and possible increases in interest rates in the absence of economic improvement. Any one or a combination of these events may adversely affect borrowers’ ability to repay the loans, resulting in increased delinquencies, credit losses and higher levels of provisions. Management considers it important to maintain the ratio of the allowance for credit losses to total loans at an acceptable level given current and forecasted economic conditions, interest rates and the composition of the portfolio. The CECL approach to calculate the allowance for credit losses on loans is significantly influenced by the composition, characteristics, and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecast utilized. Material changes to these and other relevant factors creates greater volatility to the allowance for credit losses, and therefore, greater volatility to the Company’s reported earnings. Although management believes that the Company has established and maintained the allowance for credit losses at appropriate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment and economic forecast. Management evaluates its estimates and assumptions on an ongoing basis giving consideration to forecasted economic factors, historical loss experience and other factors. The model includes both quantitative and qualitative components. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods, and to the extent actual losses are higher than management estimates, additional provision for credit losses on loans could be required and could adversely affect our earnings 85 or financial position in future periods. In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for credit losses as an integral part of their examination process. Such agencies may require the Company to recognize additions to the allowance or additional write-downs based on their judgments about information available to them at the time of their examination. Although management uses the best information available, the level of the allowance for credit losses remains an estimate that is subject to significant judgment and short-term volatility. See Note 7 to the Consolidated Financial Statements for more information on the allowance for credit losses on loans. Material changes to these and other relevant factors creates greater volatility to the allowance for credit losses, and therefore, greater volatility to the Company’s reported earnings. For the year ended December 31, 2023, the increase in provision was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices used in our CECL model. Foreclosed Assets Assets acquired through foreclosure or deed in lieu of foreclosure are carried at the lower of the outstanding loan balance at the time of foreclosure or fair value, less estimated costs to sell. Fair value is generally based on recent appraisals. When an asset is acquired, the excess of the loan balance over fair value, less estimated costs to sell, 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. Banking Premises and Equipment Land is carried at cost. Banking premises, furniture, fixtures and equipment are carried at cost, less accumulated depreciation, computed using the straight-line method based on their estimated useful lives. Leasehold improvements, carried at cost, net of accumulated depreciation, are amortized over the terms of the leases or the estimated useful lives of the assets, whichever are shorter, using the straight-line method. Maintenance and repairs are charged to expense as incurred. Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in tax expense in the period that includes the enactment date. Deferred tax assets and liabilities are reported as a component of Other Assets on the Consolidated Statements of Financial Condition. The determination of whether deferred tax assets will be realizable is predicated on estimates of future taxable income. Such estimates are subject to management’s judgment. A valuation reserve is established when management is unable to conclude that it is more likely than not that it will realize deferred tax assets based on the nature and timing of these items. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes. Trust Assets Trust assets consisting of securities and other property (other than cash on deposit held by the Bank in fiduciary or agency capacities for customers of the Bank’s wholly owned subsidiary, Beacon) are not included in the accompanying consolidated statements of financial condition because such properties are not assets of the Bank. Intangible Assets Intangible assets of the Bank consist of goodwill, core deposit premiums, customer relationship premium and mortgage servicing rights. 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. 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 86 annual qualitative assessment of goodwill as of July 1, 2023. Based upon its assessment of goodwill, the Company concluded that no further quantitative analysis was warranted. Core deposit premiums represent the intangible value of depositor relationships assumed in previous purchase acquisitions and are amortized on an accelerated basis over 8.8 years, while the core deposit premium related to SB One is amortized over its estimated useful life of 10.0 years. Customer relationship premiums represent the intangible value of customer relationships assumed in the purchase acquisitions of Beacon Trust Company ("Beacon"), The MDE Group, Inc. ("MDE"), Tirschwell & Loewy, Inc. ("T&L"), and SB One Bank and are amortized on an accelerated basis over 12.0 years, 10.4 years, 10.0 years, and 13.0 years, respectively. Mortgage servicing rights are recorded when purchased or when originated mortgage loans are sold, with servicing rights retained. Mortgage servicing rights are amortized on an accelerated method based upon the estimated lives of the related loans, adjusted for prepayments. Mortgage servicing rights are carried at the lower of amortized cost or fair value. Bank-owned Life Insurance Bank-owned life insurance is accounted for using the cash surrender value method and is recorded at its realizable value. Employee Benefit Plans The Bank maintains a pension plan which covers full-time employees hired prior to April 1, 2003, the date on which the pension plan was frozen. The Bank’s policy is to fund at least the minimum contribution required by the Employee Retirement Income Security Act of 1974. GAAP requires an employer to: (a) recognize in its statement of financial condition the over-funded or under-funded status of a defined benefit post-retirement plan measured as the difference between the fair value of plan assets and the benefit obligation; (b) measure a plan’s assets and its obligations that determine its funded status at the end of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income, net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period. The Bank has a 401(k) plan covering substantially all employees of the Bank. The Bank may match a percentage of the first 6 % contributed by participants. The Bank’s matching contribution, if any, is determined by the board of directors in its sole discretion. The Bank has an Employee Stock Ownership Plan (“ESOP”). The funds borrowed by the ESOP from the Company to purchase the Company’s common stock are being repaid from the Bank’s contributions and dividends paid on unallocated ESOP shares over a period of up to 30 years. The Company’s common stock not allocated to participants is recorded as a reduction of stockholders’ equity at cost. Compensation expense for the ESOP is based on the average price of the Company’s stock during each quarter and the amount of shares allocated during the quarter. The Bank has an Equity Plan designed to provide competitive compensation for demonstrated performance and to align the interests of participants directly to increases in shareholder value. The Equity Plan provides for performance-vesting grants as well as time-vesting grants. Time-vesting stock awards, stock options and performance vesting stock awards that are based on a performance condition, such as return on average assets, are valued on the closing stock price on the date of grant. Performance-vesting stock awards and options that are based on a market condition, such as total shareholder return, would be valued using a generally accepted statistical technique to simulate future stock prices for the Bank and the components of the peer group which the Bank would be measured against. Expense related to time-vesting stock awards and stock options is based on the fair value of the common stock on the date of the grant and on the fair value of the stock options on the date of the grant, respectively, and is recognized ratably over the vesting period of the awards. Performance vesting stock awards and stock options are either dependent upon a market condition or a performance condition. A market condition performance metric is tied to a stock price, either on an absolute basis, or a relative basis against peers, while a performance-condition is based on internal operations, such as earnings per share. The expense related to a market condition performance-vesting stock award or stock option requires an initial Monte Carlo simulation to determine grant date fair value, which will be recognized as a compensation expense regardless of actual payout, assuming that the executive is still employed at the end of the requisite service period. If pre-vesting termination (forfeiture) occurs, then any expense recognized to date can be reversed. The grant date fair value is recognized ratably over the performance period. The expense related to a performance condition stock award or stock option is based on the fair value of the award on the date of grant, adjusted periodically based upon the number of awards or options expected to be earned, recognized over the performance period. 87 In connection with the First Sentinel acquisition in July 2004, the Company assumed the First Savings Bank Directors’ Deferred Fee Plan (the “DDFP”). The DDFP was frozen prior to the acquisition. The Company recorded a deferred compensation equity instrument and corresponding contra-equity account for the value of the shares held by the DDFP at the July 14, 2004 acquisition date. Effective November 1, 2023, the DDFP was terminated and final distributions are expected on or about November 1, 2024. As of December 31, 2023, there were 65,744 shares held by the DDFP. The Bank maintains a non-qualified plan that provides supplemental benefits to certain executives who are prevented from receiving the full benefits contemplated by the 401(k) Plan’s and the ESOP’s benefit formulas under tax law limits for tax-qualified plans. Post-retirement Benefits Other Than Pensions The Bank provides post-retirement health care and life insurance plans to certain of its employees. The life insurance coverage is noncontributory to the participant. Participants contribute to the cost of medical coverage based on the employee’s length of service with the Bank. 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. On December 31, 2002, the Bank eliminated post-retirement healthcare benefits for employees with less than 10 years of service. GAAP requires an employer to: (a) recognize in its statement of financial condition the over-funded or under-funded status of a defined benefit post-retirement plan measured as the difference between the fair value of plan assets and the benefit obligation; (b) measure a plan’s assets and its obligations that determine its funded status as of the end of the employer’s fiscal year (with limited exceptions); and (c) recognize as a component of other comprehensive income, net of tax, the actuarial gains and losses and the prior service costs and credits that arise during the period. Derivatives The Company records all derivatives on the statements of financial condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. The Company has interest rate derivatives resulting from a service provided to certain qualified borrowers in a loan related transaction which, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. As such, all changes in fair value of the Company’s derivatives are recognized directly in earnings. The Company also uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges, and which satisfy hedge accounting requirements, involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. These derivatives were used to hedge the variable cash outflows associated with FHLBNY borrowings and brokered demand deposits. The change in the fair value of these derivatives is recorded in accumulated other comprehensive income, and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Comprehensive Income Comprehensive income is divided into net income and other comprehensive income (loss). Other comprehensive income (loss) includes items previously recorded directly to equity, such as unrealized gains and losses on available for sale debt securities, unrealized gains and losses on derivatives that are designated as cash flow hedges and amortization related to post-retirement obligations. Comprehensive income is presented in a separate Consolidated Statement of Comprehensive Income. Segment Reporting The Company’s operations are solely in the financial services industry and include providing traditional banking and other financial services to its customers. The Company operates primarily in the geographical regions of northern and central New Jersey, Queens and Nassau Counties in New York and eastern Pennsylvania. The Company has a single reporting segment for financial reporting purposes. Earnings Per Share Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if 88 securities or other contracts to issue common stock (such as stock options) were exercised or resulted in the issuance of common stock. These potentially dilutive shares would then be included in the weighted average number of shares outstanding for the period using the treasury stock method. Shares issued and shares reacquired during the period are weighted for the portion of the period that they were outstanding. Impact of Recent Accounting Pronouncements Accounting Pronouncements Adopted This Year In March 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-02, "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," which addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancing and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities that have adopted ASU 2016-13, ASU 2022-02 was effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption was permitted if an entity had adopted ASU 2016-13. The Company adopted this ASU on January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be recorded with previously applicable GAAP. 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. In March 2022, the FASB issued Accounting Standards Update (ASU) 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method . The purpose of this updated guidance is to further align risk management objectives with hedge accounting results on the application of the last-of-layer method, which was first introduced in ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2022-01 is effective for public business entities for fiscal years beginning after December 15, 2022, with early adoption in the interim period permitted. The Company adopted this standard on January 1, 2023 on a prospective basis, with no impact to the 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. 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. The Company has reviewed all of its LIBOR-based products and all products have been adjusted to another index or are scheduled to be adjusted at their next repricing, as LIBOR ceased to be published after June 30, 2023. The Company adjusted its processes and procedures related to the amendments and it did not have a material impact to the Company’s financial position and results and operations. (2) Stockholders’ Equity On January 15, 2003, the Bank completed its plan of conversion, and the Bank became a wholly owned subsidiary of the Company. The Company sold 59.6 million shares of common stock (par value $ 0.01 per share) at $ 10.00 per share. The Company received net proceeds in the amount of $ 567.2 million. In connection with the Bank’s commitment to its community, the plan of conversion provided for the establishment of a charitable foundation. The Bank donated $ 4.8 million in cash and 1.92 million of authorized but unissued shares of common stock to the foundation, which amounted to $ 24.0 million in aggregate. The Company recognized an expense, net of income 89 tax benefit, equal to the cash and fair value of the stock during 2003. Conversion costs were deferred and deducted from the proceeds of the shares sold in the offering. Upon completion of the plan of conversion, a “liquidation account” was established in an amount equal to the total equity of the Bank as of the latest practicable date prior to the conversion. The liquidation account was established to provide a limited priority claim to the assets of the Bank to “eligible account holders” and “supplemental eligible account holders” as defined in the Plan, who continue to maintain deposits in the Bank after the conversion. In the unlikely event of a complete liquidation of the Bank, and only in such event, each eligible account holder and supplemental eligible account holder would receive a liquidation distribution, prior to any payment to the holder of the Bank’s common stock. This distribution would be based upon each eligible account holder's and supplemental eligible account holder’s proportionate share of the then total remaining qualifying deposits. As of December 31, 2023, the liquidation account, which is an off-balance sheet memorandum account, amounted to $ 7.2 million. (3) Business Combinations Lakeland Bancorp, Inc. Merger Agreement On September 26, 2022, the Company, NL 239 Corp., a direct, wholly owned subsidiary of the Company (“Merger Sub”), and Lakeland Bancorp, Inc. entered into an Agreement and Plan of Merger (as may be amended, modified or supplemented from time to time in accordance with its terms, the “merger agreement”), pursuant to which the Company and Lakeland have agreed to combine their respective businesses. Under the merger agreement, Merger Sub will merge with and into Lakeland, with Lakeland as the surviving entity (the “merger”), and as soon as reasonably practicable following the merger, Lakeland will merge with and into the Company, with the Company as the surviving entity (the “holdco merger”). At a date and time following the holdco merger as determined by the Company, Lakeland Bank, a New Jersey state-charted commercial bank and a wholly owned subsidiary of Lakeland (“Lakeland Bank”), will merge with and into the Bank, with the Bank as the surviving bank (the “bank merger” and, together with the merger and the holdco merger, the “mergers”). The Company as the surviving institution will have approximately $ 25 billion in total assets, $ 18 billion in total loans and $ 20 billion in total deposits with banking locations across northern and central New Jersey and in surrounding areas of New York and Pennsylvania. In the merger, Lakeland shareholders will receive 0.8319 of a share of the Company’s common stock for each share of Lakeland common stock they own. Upon completion of the transaction, which remains subject to regulatory approvals and other closing conditions, Company shareholders will own approximately 58 % and Lakeland shareholders will own approximately 42 % of the combined company. The Company has received stockholder approval to proceed with the merger at a special meeting of stockholders held on February 1, 2023. Lakeland has received shareholder approval to proceed with the merger at a special meeting of shareholders held on February 1, 2023. On December 20, 2023, the Company, along with Lakeland, agreed to extend their merger agreement to March 31, 2024, to provide additional time to obtain the required regulatory approvals. (4) Restrictions on Cash and Due from Banks Included in cash on hand and due from banks as of December 31, 2023 and 2022 was $ 70,000 , which represents cash collateral pledged to secure loan level swaps and risk participation agreements. 90 (5) 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 as of December 31, 2023 and 2022 (in thousands): 2023 Amortized cost Gross unrealized gains Gross unrealized losses Fair value Treasury Obligations $ 5,146 1 — 5,147 Agency-sponsored obligations 11,058 — ( 652 ) 10,406 State and municipal obligations 339,816 244 ( 9,700 ) 330,360 Corporate obligations 7,091 — ( 403 ) 6,688 $ 363,111 245 ( 10,755 ) 352,601 2022 Amortized cost Gross unrealized gains Gross unrealized losses Fair value Agency-sponsored obligations $ 9,997 — ( 1,033 ) 8,964 State and municipal obligations 366,164 268 ( 13,015 ) 353,417 Corporate obligations 11,789 1 ( 703 ) 11,087 $ 387,950 269 ( 14,751 ) 373,468 Accrued interest on held to maturity debt securities, which is excluded from the amortized cost, totaled $ 3.1 million and $ 3.4 million as of December 31, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition. The amortized cost and fair value of held to maturity debt securities as of December 31, 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. 2023 Amortized cost Fair value Due in one year or less $ 32,659 32,619 Due after one year through five years 170,306 168,350 Due after five years through ten years 133,538 129,451 Due after ten years 26,608 22,181 $ 363,111 352,601 The allowance for credit losses on held to maturity debt securities as of December 31, 2023 and 2022 were $ 31,000 and $ 27,000 , respectively, and are excluded from amortized cost in the tables above. Accrued interest receivable on held to maturity debt securities are excluded from the estimate of credit losses. The Company generally purchases securities for long-term investment purposes, and differences between carrying and fair values may fluctuate during the investment period. Held to maturity debt securities having a carrying value of $ 317.6 million and $ 340.2 million as of December 31, 2023 and 2022, respectively, were pledged to secure municipal deposits. During 2023, the Company recognized gains of $ 45,000 and losses of $ 15,000 related to calls on securities in the held to maturity debt securities portfolio, with total proceeds from the calls totaling $ 11.6 million. There were no sales of securities from the held to maturity debt securities portfolio for the year ended December 31, 2023. 91 For 2022, the Company recognized gains of $ 123,000 and no losses related to calls on securities in the held to maturity debt securities portfolio, with total proceeds from the calls totaling $ 39.2 million. There were no sales of securities from the held to maturity debt securities portfolio for the year ended December 31, 2022. For the 2021 period, the Company recognized gains of $ 25,000 and no losses related to calls on certain securities in the held to maturity debt securities portfolio, with total proceeds from the calls totaling $ 36.0 million. There were no sales of securities from the held to maturity debt securities portfolio for the year ended December 31, 2021. The number of securities in an unrealized loss position as of December 31, 2023 totaled 372 , compared with 439 as of December 31, 2022. The decrease in the number of securities in an unrealized loss position as of December 31, 2023 was due to lower current market interest rates on the intermediate part of the curve compared to rates as of 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-sponsored 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 credit ratings from the rating agencies as of December 31, 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 December 31, 2023 (in thousands): December 31, 2023 Total Portfolio AAA AA A BBB Not Rated Total Treasury obligations $ 5,146 — — — — 5,146 Agency-sponsored obligations 11,058 — — — — 11,058 State and municipal obligations 43,749 156,438 137,231 — 2,398 339,816 Corporate obligations 504 2,510 4,052 — 25 7,091 $ 60,457 158,948 141,283 — 2,423 363,111 December 31, 2022 Total Portfolio AAA AA A BBB Not Rated Total Agency-sponsored obligations $ 9,997 — — — — 9,997 State and municipal obligations 48,453 171,934 143,829 770 1,178 366,164 Corporate obligations 507 3,592 7,415 — 275 11,789 $ 58,957 175,526 151,244 770 1,453 387,950 Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. As of December 31, 2023, the held to maturity debt securities portfolio was comprised of 17 % rated AAA, 44 % 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. Government mortgage-backed securities, were grouped where possible under the credit rating of the issuer of the security. 92 (6) 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 as of December 31, 2023 and 2022 (in thousands): 2023 Amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. Treasury obligations $ 276,618 — ( 22,740 ) 253,878 Agency guaranteed obligations 26,310 1,188 — 27,498 Mortgage-backed securities 1,462,159 377 ( 176,927 ) 1,285,609 Asset-backed securities 31,809 594 ( 168 ) 32,235 State and municipal obligations 64,454 — ( 7,870 ) 56,584 Corporate obligations 40,448 — ( 6,140 ) 34,308 $ 1,901,798 2,159 ( 213,845 ) 1,690,112 2022 Amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. Treasury obligations $ 275,620 — ( 29,804 ) 245,816 Mortgage-backed securities 1,636,913 209 ( 209,983 ) 1,427,139 Asset-backed securities 37,706 278 ( 363 ) 37,621 State and municipal obligations 67,706 — ( 10,842 ) 56,864 Corporate obligations 40,540 50 ( 4,482 ) 36,108 $ 2,058,485 537 ( 255,474 ) 1,803,548 Accrued interest on available for sale debt securities, which is excluded from the amortized cost, totaled $ 4.9 million and $ 4.8 million as of December 31, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition. Available for sale debt securities having a carrying value of $ 1.13 billion and $ 1.25 billion as of December 31, 2023 and 2022, respectively, were pledged as collateral for municipal deposits and repurchase agreements. The amortized cost and fair value of available for sale debt securities as of December 31, 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. 2023 Amortized cost Fair value Due in one year or less $ — — Due after one year through five years 284,034 261,097 Due after five years through ten years 43,269 36,399 Due after ten years 54,217 47,274 $ 381,520 344,770 Investments which pay principal on a periodic basis totaling $ 1.52 billion at amortized cost and $ 1.35 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. During 2023, proceeds from calls on securities in the available for sale debt securities portfolio totaled $ 2.3 million with no gains and no losses recognized. For 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. 93 The number of securities in an unrealized loss position as of December 31, 2023 totaled 436 , compared with 475 as of December 31, 2022. The decrease in the number of securities in an unrealized loss position as of December 31, 2023 was due to lower current market interest rates on the intermediate part of the curve compared to rates as of December 31, 2022. 94 (7) Loans Receivable and Allowance for Credit Losses Loans receivable as of December 31, 2023 and 2022 are summarized as follows (in thousands): 2023 2022 Mortgage loans: Commercial $ 4,512,411 4,316,185 Multi-family 1,812,500 1,513,818 Construction 653,246 715,494 Residential 1,164,956 1,177,698 Total mortgage loans 8,143,113 7,723,195 Commercial loans 2,442,406 2,233,670 Consumer loans 299,164 304,780 Total gross loans 10,884,683 10,261,645 Premiums on purchased loans 1,474 1,380 Net deferred fees ( 12,456 ) ( 14,142 ) Total loans $ 10,873,701 10,248,883 Accrued interest on loans totaled $ 50.9 million and $ 43.8 million as of December 31, 2023 and December 31, 2022, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition. The Bank does not, as a general practice, make loans to its directors, or to their immediate family members and related interests. As of December 31, 2023, As of December 31, 2023, the Bank had aggregate loans and loan commitments totaling $ 3.6 million to its executive officers or their related entities. These loans and loan commitments were made on substantially the same terms, including interest rates and collateral, as those prevailing for comparable transactions with the general public and do not involve more than the normal risk of repayment or present other unfavorable features. It is the policy of the Bank that no loan or extension of credit of any type shall be made to any member of the board of directors or their immediate family, or to any entity which is controlled by a member of the board of directors or their immediate family and none existed as of December 31, 2023. Premiums and discounts on purchased loans are amortized or accreted over the lives of the loans as an adjustment to yield. Required reductions due to loan prepayments are charged against or credited to interest income, as appropriate. For the years ended December 31, 2023, 2022 and 2021, as a result of prepayments and normal amortization, interest income decreased $ 206,000 , $ 270,000 and $ 604,000 , respectively. The following tables summarize the aging of loans receivable by portfolio segment and class of loans (in thousands): As of December 31, 2023 30-59 Days 60-89 Days 90 days or more past due and accruing Non-accrual Total Past Due Current Total Loans Receivable Non-accrual loans with no related allowance Mortgage loans: Commercial $ 825 — — 5,151 5,976 4,506,435 4,512,411 5,151 Multi-family 3,815 1,635 — 744 6,194 1,806,306 1,812,500 744 Construction — — — 771 771 652,475 653,246 771 Residential 3,429 1,208 — 853 5,490 1,159,466 1,164,956 853 Total mortgage loans 8,069 2,843 — 7,519 18,431 8,124,682 8,143,113 7,519 Commercial loans 998 198 — 41,487 42,683 2,399,723 2,442,406 36,281 Consumer loans 875 275 — 633 1,783 297,381 299,164 633 Total gross loans $ 9,942 3,316 — 49,639 62,897 10,821,786 10,884,683 44,433 95 As of December 31, 2022 30-59 Days 60-89 Days 90 days or more past due and accruing Non-accrual Total Past Due Current Total Loans Receivable Non-accrual loans with no related allowance Mortgage loans: Commercial $ 2,300 412 — 28,212 30,924 4,285,261 4,316,185 22,961 Multi-family 790 — — 1,565 2,355 1,511,463 1,513,818 1,565 Construction 905 1097 — 1,878 3,880 711,614 715,494 1,878 Residential 1,411 1,114 — 1,928 4,453 1,173,245 1,177,698 1,928 Total mortgage loans 5,406 2,623 — 33,583 41,612 7,681,583 7,723,195 28,332 Commercial loans 964 1,014 — 24,188 26,166 2,207,504 2,233,670 21,156 Consumer loans 885 147 — 738 1,770 303,010 304,780 739 Total gross loans $ 7,255 3,784 — 58,509 69,548 10,192,097 10,261,645 50,227 Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. 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 principal amount of non-accrual loans was $ 49.6 million and $ 58.5 million as of December 31, 2023 and 2022, respectively. There were no loans 90-days or greater past due and still accruing interest as of December 31, 2023 and 2022. If the non-accrual loans had performed in accordance with their original terms, interest income would have increased by $ 1.6 million, $ 1.0 million and $ 1.2 million, for the years ended December 31, 2023, 2022 and 2021, respectively. The activity in the allowance for credit losses for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands): Years Ended December 31, 2023 2022 2021 Balance at beginning of period $ 88,023 80,740 101,466 Cumulative effect of adopting ASU 2022-02 ( 594 ) — — Provision charge (benefit) for credit losses on loans 27,900 8,400 ( 24,300 ) Recoveries of loans previously charged off 2,292 5,431 9,030 Loans charged off ( 10,421 ) ( 6,548 ) ( 5,456 ) Balance at end of period $ 107,200 88,023 80,740 96 The activity in the allowance for credit losses by portfolio segment for the years ended December 31, 2023 and 2022 are as follows (in thousands): For the Year Ended December 31, 2023 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Balance at beginning of period $ 58,218 27,413 2,392 88,023 Cumulative effect of adopting ASU 2022-02 ( 510 ) ( 43 ) ( 41 ) ( 594 ) Provision charge (benefit) for credit losses on loans 16,877 11,159 ( 136 ) 27,900 Recoveries of loans previously charged off 546 1,309 437 2,292 Loans charged off ( 1,724 ) ( 8,363 ) ( 334 ) ( 10,421 ) Balance at end of period $ 73,407 31,475 2,318 107,200 For the Year Ended December 31, 2022 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Balance at beginning of period $ 52,104 26,343 2,293 80,740 Provision charge (benefit) for credit losses on loans 11,087 ( 2,489 ) ( 198 ) 8,400 Recoveries of loans previously charged off 585 4,192 654 5,431 Loans charged off ( 5,558 ) ( 633 ) ( 357 ) ( 6,548 ) Balance at end of period $ 58,218 27,413 2,392 88,023 For the year ended December 31, 2023, the Company recorded an $ 27.9 million provision for credit losses on loans, compared with a provision for credit losses of $ 8.4 million for the year ended December 31, 2022. The increase in the year-over-year provision for credit losses was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices used in our CECL model. The following table summarizes the Company's gross charge-offs recorded for the year ended December 31, 2023 by year of origination (in thousands): 2023 2022 2021 2020 2019 Prior to 2019 Total Loans Mortgage loans: Commercial $ — — — — — 1,700 1,700 Residential — — — — — 24 24 Total mortgage loans $ — — — — — 1,724 1,724 Commercial loans — — — 5,000 — 3,363 8,363 Consumer loans (1) 24 — — — — 13 37 Total gross loans $ 24 — — 5,000 — 5,100 10,124 (1) During the year ended December 31, 2023, charge-offs on consumer overdraft accounts totaled $ 297,000 , which are not included in the table above. The Company defines an impaired loan as a non-accrual, non-homogeneous loan greater than $ 1.0 million, or which, based on current information, it is not expected to collect all amounts due under the contractual terms of the loan agreement. As of December 31, 2023, there were 17 impaired loans totaling $ 42.3 million 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. 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 97 the loan’s carrying value to the collateral’s fair value less estimated selling costs. The Company uses third-party appraisals to determine the fair value of the underlying collateral in its analysis of collateral-dependent loans. A third-party appraisal is generally ordered as soon as a loan is designated as a collateral-dependent loan and updated annually, or more frequently if required. At each fiscal quarter end, if a loan is designated as collateral-dependent and the third-party appraisal has not yet been received, an evaluation of all available collateral is made using the best information available at the time, including rent rolls, borrower financial statements and tax returns, prior appraisals, management’s knowledge of the market and collateral, and internally prepared collateral valuations based upon market assumptions regarding vacancy and capitalization rates, each as and where applicable. Once the appraisal is received and reviewed, the specific reserves are adjusted to reflect the appraised value and evaluated for charge offs. The Company believes there have been no significant time lapses resulting from this process. As of December 31, 2023, impaired loans totaled $ 42.3 million with related specific reserves of $ 2.9 million. As of December 31, 2023, the Company had collateral-dependent impaired loans with a fair value of $ 24.1 million secured by commercial real estate. As of December 31, 2022, the Company had collateral-dependent loans with a fair value of $ 21.3 million secured by commercial real estate, $ 1.9 million secured by business assets and $ 800,000 secured by residential real estate. 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. The following illustrates the most common loan modifications by loan classes offered by the Company that are required to be disclosed pursuant to the requirements of ASU 2022-02: Loan Classes Modification types Commercial Term extension, interest rate reductions, payment delay, or combination thereof. These modifications extend the term of the loan, lower the payment amount, or otherwise delay payments during a defined period for the purpose of providing borrowers additional time to return to compliance with the original loan term. Residential Mortgage/ Home Equity Forbearance period greater than six months. These modifications require reduced or no payments during the forbearance period for the purpose of providing borrowers additional time to return to compliance with the original loan term, as well as term extension and rate adjustment. These modifications extend the term of the loan and provides for an adjustment to the interest rate, which reduces the monthly payment requirement. Automobile/ Direct Installment Term extension greater than three months. These modifications extend the term of the loan, which reduces the monthly payment requirement. Effective January 1, 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for TDRs while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a modified retrospective basis. Upon adoption of this guidance, the Company no longer establishes a specific reserve for loan modifications to borrowers experiencing financial difficulty. Instead, these loan modifications are included in their respective pool and a projected loss rate is applied to the current loan balance to arrive at the quantitative and qualitative baseline portion of the allowance for credit losses. As a result, the Company recorded a $ 594,000 reduction to the allowance for credit losses, which resulted in a $ 433,000 cumulative effect adjustment increase, net of tax, to retained earnings. The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty for the year ended December 31, 2023 (in thousands): 98 Year Ended December 31, 2023 Term Extension Interest Rate Change Interest Rate Change and Term Extension Total % of Total Class of Loans and Leases Mortgage loans: Multi-family $ — — 1,508 1,508 0.08 % Total mortgage loans — — 1,508 1,508 0.02 Commercial loans 3,771 — 1,250 5,021 0.21 Total gross loans $ 3,771 — 2,758 6,529 0.06 % The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty for the year ended December 31, 2023 (in thousands): Weighted Average Months of Term Extension Weighted Average Rate Increase Mortgage loans: Multi-family 2 2.23 % Total mortgage loans 2 2.23 Commercial loans 10 0.20 Total gross loans 9 0.61 % There were no loan modifications made to borrowers experiencing financial difficulty for year ended December 31, 2023, that subsequently defaulted. The following table presents the aging analysis of loan modifications made to borrowers experiencing financial difficulty for the year ended December 31, 2023 (in thousands): Current 30-59 Days Past Due 60-89 Days Past Due 90 days or more Past Due Non- Accrual Total Mortgage loans: Multi-family $ 1,508 — — — — 1,508 Total mortgage loans 1,508 — — — — 1,508 Commercial loans 5,021 — — — — 5,021 Total gross loans $ 6,529 — — — — 6,529 Prior to our adoption of ASU 2022-02, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. However, our TDR accounting described herein was suspended for most of our loss mitigation activities through our election to account for certain eligible loss mitigation activities occurring between March 2020 and January 1, 2022 under the COVID-19 relief granted pursuant to the CARES Act and the Consolidated Appropriations Act of 2021. Effective January 1, 2023, we adopted ASU 2022-02, which eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023. 99 The following table presents the number of loans modified as TDRs during the year ended December 31, 2022 and their balances immediately prior to the modification date and post-modification as of December 31, 2022: Year Ended December 31, 2022 Troubled Debt Restructurings Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment ($ in thousands) Mortgage loans: Multi-Family 1 $ 1,618 1,566 Residential 2 265 198 Total mortgage loans 3 1,883 1,764 Commercial loans 1 209 143 Consumer loans 1 108 85 Total restructured loans 5 $ 2,200 1,992 During the year ended December 31, 2022, $ 5.5 million of charge-offs were recorded on collateral dependent impaired loans. There was one loan totaling $ 143,000 which had a payment default (90 days or more past due) for a loan modified as a TDR within the 12-month period ending December 31, 2022. For TDRs that subsequently default, 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 PCD loans. As of December 31, 2023, the balance of PCD loans totaled $ 165.1 million with a related allowance for credit losses of $ 1.7 million. The balance of PCD loans as of December 31, 2022, was $ 193.0 million with a related allowance for credit losses of $ 1.7 million. Management utilizes an internal nine-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (watch) or 6 (special mention). Loans with adverse classifications (substandard, doubtful or loss) are rated 7, 8 or 9, respectively. Commercial mortgage, commercial, multi-family and construction loans are rated individually, and each lending officer is responsible for risk rating loans in their portfolio. These risk ratings are then reviewed by the department manager and/or the Chief Lending Officer and by the Credit Department. The risk ratings are also reviewed periodically through loan review examinations which are currently performed by an independent third-party. Reports by the independent third-party are presented to the Audit Committee of the board of directors. The Company participated in the Paycheck Protection Program (“PPP”) through the United States Department of the Treasury and Small Business Administration. 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. PPP loans deemed eligible for forgiveness by the SBA were repaid by the SBA to the Company. Eligibility ended for this program in May of 2021. PPP loans are included in our commercial loan portfolio. As of December 31, 2023, 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 December 31, 2023, 2,054 PPP loans totaling $ 679.4 million were forgiven. The balance as of December 31, 2023 for PPP loans was $ 2.5 million. 100 The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades (in thousands): Gross Loans Held for Investment by Year of Origination as of December 31, 2023 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Revolving loans to term loans Total Loans Commercial Mortgage Special mention $ — 10,926 3,048 28,511 10,558 24,598 4,500 — 82,141 Substandard 482 — — — — 9,599 434 — 10,515 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified 482 10,926 3,048 28,511 10,558 34,197 4,934 — 92,656 Pass/Watch 628,709 883,149 677,464 470,257 470,971 1,166,205 90,760 32,240 4,419,755 Total commercial mortgage $ 629,191 894,075 680,512 498,768 481,529 1,200,402 95,694 32,240 4,512,411 Multi-family Special mention $ — — — — — 9,500 — — 9,500 Substandard 3,253 — — — — — — — 3,253 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified 3,253 — — — — 9,500 — — 12,753 Pass/Watch 340,842 172,244 184,136 271,878 230,456 592,470 6,115 1,606 1,799,747 Total multi-family $ 344,095 172,244 184,136 271,878 230,456 601,970 6,115 1,606 1,812,500 Construction Special mention $ — — — — — — — — — Substandard — — — — — 771 — — 771 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — — 771 — — 771 Pass/Watch 41,209 342,890 185,034 68,603 1,339 13,400 — — 652,475 Total construction $ 41,209 342,890 185,034 68,603 1,339 14,171 — — 653,246 Residential (1) Special mention $ — — — — — 1,208 — — 1,208 Substandard — — — — — 1,285 — — 1,285 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — — 2,493 — — 2,493 Pass/Watch 96,259 141,683 200,111 195,964 89,654 438,792 — — 1,162,463 Total residential $ 96,259 141,683 200,111 195,964 89,654 441,285 — — 1,164,956 Total Mortgage Special mention $ — 10,926 3,048 28,511 10,558 35,306 4,500 — 92,849 Substandard 3,735 — — — — 11,655 434 — 15,824 Doubtful — — — — — — — — — 101 Gross Loans Held for Investment by Year of Origination as of December 31, 2023 2023 2022 2021 2020 2019 Prior to 2019 Revolving Loans Revolving loans to term loans Total Loans Loss — — — — — — — — — Total criticized and classified 3,735 10,926 3,048 28,511 10,558 46,961 4,934 — 108,673 Pass/Watch 1,107,019 1,539,966 1,246,745 1,006,702 792,420 2,210,867 96,875 33,846 8,034,440 Total Mortgage $ 1,110,754 1,550,892 1,249,793 1,035,213 802,978 2,257,828 101,809 33,846 8,143,113 Commercial Special mention $ 450 17,008 9,338 2,409 152 22,752 23,333 687 76,129 Substandard 686 — 20,262 9,235 2,034 11,313 10,736 508 54,774 Doubtful 7,011 — — — — — — — 7,011 Loss — — — — — — — — — Total criticized and classified 8,147 17,008 29,600 11,644 2,186 34,065 34,069 1,195 137,914 Pass/Watch 358,578 316,015 318,416 131,647 143,677 493,191 471,962 71,006 2,304,492 Total commercial $ 366,725 333,023 348,016 143,291 145,863 527,256 506,031 72,201 2,442,406 Consumer (1) Special mention $ — — — — — 97 178 — 275 Substandard — — — — 9 146 389 90 634 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — 9 243 567 90 909 Pass/Watch 29,083 26,098 18,101 3,459 14,375 85,383 108,431 13,325 298,255 Total consumer $ 29,083 26,098 18,101 3,459 14,384 85,626 108,998 13,415 299,164 Total Loans Special mention $ 450 27,934 12,386 30,920 10,710 58,155 28,011 687 169,253 Substandard 4,421 — 20,262 9,235 2,043 23,114 11,559 598 71,232 Doubtful 7,011 — — — — — — — 7,011 Loss — — — — — — — — — Total criticized and classified 11,882 27,934 32,648 40,155 12,753 81,269 39,570 1,285 247,496 Pass/Watch 1,494,680 1,882,079 1,583,262 1,141,808 950,472 2,789,441 677,268 118,177 10,637,187 Total gross loans $ 1,506,562 1,910,013 1,615,910 1,181,963 963,225 2,870,710 716,838 119,462 10,884,683 (1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan. 102 Gross Loans Held for Investment by Year of Origination as of December 31, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Commercial Mortgage Special mention $ — — 3,071 26,809 52,509 14,740 — — 97,129 Substandard — — — — 18,020 11,774 434 — 30,228 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 3,071 26,809 70,529 26,514 434 — 127,357 Pass/Watch 951,367 630,584 567,448 546,474 218,620 1,164,854 94,716 14,765 4,188,828 Total commercial mortgage $ 951,367 630,584 570,519 573,283 289,149 1,191,368 95,150 14,765 4,316,185 Multi-family Special mention $ — — — — — 9,730 — — 9,730 Substandard — — — — — 2,356 — — 2,356 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — — 12,086 — — 12,086 Pass/Watch 142,550 150,293 282,228 234,953 187,499 502,177 887 1,145 1,501,732 Total multi-family $ 142,550 150,293 282,228 234,953 187,499 514,263 887 1,145 1,513,818 Construction Special mention $ — — — — 19,728 905 — — 20,633 Substandard — — — 2,197 777 — — — 2,974 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — 2,197 20,505 905 — — 23,607 Pass/Watch 168,674 362,542 103,067 38,639 16,917 62 1,986 691,887 Total construction $ 168,674 362,542 103,067 40,836 37,422 967 — 1,986 715,494 Residential (1) Special mention $ — — — — — 1,114 — — 1,114 Substandard — — — — 264 4,417 — — 4,681 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — — — 264 5,531 — — 5,795 Pass/Watch 151,077 212,697 211,445 95,872 58,226 442,586 — 1,171,903 Total residential $ 151,077 212,697 211,445 95,872 58,490 448,117 — — 1,177,698 103 Gross Loans Held for Investment by Year of Origination as of December 31, 2022 2022 2021 2020 2019 2018 Prior to 2018 Revolving Loans Revolving loans to term loans Total Loans Total Mortgage Special mention $ — — 3,071 26,809 72,237 26,489 — — 128,606 Substandard — — — 2,197 19,061 18,547 434 — 40,239 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 3,071 29,006 91,298 45,036 434 — 168,845 Pass/Watch 1,413,668 1,356,116 1,164,188 915,938 481,262 2,109,679 95,603 17,896 7,554,350 Total Mortgage $ 1,413,668 1,356,116 1,167,259 944,944 572,560 2,154,715 96,037 17,896 7,723,195 Commercial Special mention $ 75 1,148 444 201 10,156 4,379 14,530 140 31,073 Substandard — 7,605 10,230 4,391 3,561 13,734 7,604 364 47,489 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified 75 8,753 10,674 4,592 13,717 18,113 22,134 504 78,562 Pass/Watch 377,662 320,334 162,175 161,150 87,396 522,798 492,717 30,876 2,155,108 Total commercial $ 377,737 329,087 172,849 165,742 101,113 540,911 514,851 31,380 2,233,670 Consumer (1) Special mention $ — — — — — 146 — — 146 Substandard — — 8 — 109 332 209 — 658 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified — — 8 — 109 478 209 — 804 Pass/Watch 30,132 20,671 2,909 16,682 16,156 88,173 115,777 13,476 303,976 Total consumer $ 30,132 20,671 2,917 16,682 16,265 88,651 115,986 13,476 304,780 Total Loans Special mention $ 75 1,148 3,515 27,010 82,393 31,014 14,530 140 159,825 Substandard — 7,605 10,238 6,588 22,731 32,613 8,247 364 88,386 Doubtful — — — — — — — — — Loss — — — — — — — — — Total criticized and classified 75 8,753 13,753 33,598 105,124 63,627 22,777 504 248,211 Pass/Watch 1,821,462 1,697,121 1,329,272 1,093,770 584,814 2,720,650 704,097 62,248 10,013,434 Total gross loans $ 1,821,537 1,705,874 1,343,025 1,127,368 689,938 2,784,277 726,874 62,752 10,261,645 (1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan. 104 (8) Banking Premises and Equipment A summary of banking premises and equipment as of December 31, 2023 and 2022 is as follows (in thousands): 2023 2022 Land $ 13,394 14,424 Banking premises 72,905 74,945 Furniture, fixtures and equipment 56,082 55,883 Leasehold improvements 45,154 49,878 Construction in progress 5,331 1,012 Total banking premises and equipment 192,866 196,142 Less accumulated depreciation and amortization 121,868 116,348 Net banking premises and equipment $ 70,998 79,794 Depreciation expense for the years ended December 31, 2023, 2022 and 2021 amounted to $ 8.7 million, $ 9.8 million and $ 9.0 million, respectively. (9) Intangible Assets Intangible assets as of December 31, 2023 and 2022 are summarized as follows (in thousands): 2023 2022 Goodwill $ 443,623 443,623 Core deposit premiums 1,901 2,445 Customer relationship and other intangibles 11,867 14,202 Mortgage servicing rights 551 622 Total intangible assets $ 457,942 460,892 Amortization expense of intangible assets for the years ended December 31, 2023, 2022 and 2021 is as follows (in thousands): 2023 2022 2021 Core deposit premiums $ 544 730 917 Customer relationship and other intangibles 2,335 2,488 2,597 Mortgage servicing rights 73 74 150 Total amortization expense of intangible assets $ 2,952 3,292 3,664 Scheduled amortization of core deposit premiums and customer relationship intangibles for each of the next five years is as follows (in thousands): Year ended December 31, Scheduled Amortization 2024 $ 2,432 2025 2,266 2026 2,096 2027 2,043 2028 2,004 105 (10) Deposits Deposits as of December 31, 2023 and 2022 are summarized as follows (in thousands): 2023 Weighted average interest rate 2022 Weighted average interest rate Savings deposits $ 1,175,683 0.21 % $ 1,438,583 0.15 % Money market accounts 2,325,364 2.67 2,542,160 1.21 NOW accounts (1) 3,492,184 2.77 3,186,926 1.24 Non-interest bearing deposits 2,203,341 — 2,643,919 — Certificates of deposit (2) 1,095,942 3.85 751,436 1.88 Total deposits $ 10,292,514 $ 10,563,024 (1) Our insured cash sweep ("ICS") product totaled $ 520.2 million as of December 31, 2023 and are located within NOW accounts. (2) Time deposits equal to or in excess of $250,000 were, $ 218.5 million and $ 108.2 million as of December 31, 2023 and December 31, 2022, respectively. Additionally, our Certificate of Deposit Account Registry Service ("CDARS") product totaled $ 163.9 million as of December 31, 2023. Within total deposits, brokered deposits totaled $ 689.3 million as of December 31, 2023. Our brokered deposits are made up primarily of ICS deposits and CDARS. Both of these services are provided by the bank to increase the level of customers' deposit insurance. Scheduled maturities of certificates of deposit accounts as of December 31, 2023 and 2022 are as follows (in thousands): 2023 2022 Within one year $ 1,020,285 584,150 One to three years 63,866 146,053 Three to five years 11,773 21,111 Five years and thereafter 18 122 $ 1,095,942 751,436 Interest expense on deposits for the years ended December 31, 2023, 2022 and 2021 is summarized as follows (in thousands): Years ended December 31, 2023 2022 2021 Savings deposits $ 2,184 1,276 1,604 NOW and money market accounts 125,471 32,048 20,458 Certificates of deposits 31,804 5,380 4,451 $ 159,459 38,704 26,513 106 (11) Borrowed Funds Borrowed funds as of December 31, 2023 and 2022 are summarized as follows (in thousands): 2023 2022 Securities sold under repurchase agreements $ 72,161 98,000 FHLB line of credit 148,000 486,000 FHLB advances 1,299,872 753,370 FED Bank Term Funding Program ("BTFP") Borrowing 450,000 — Total borrowed funds $ 1,970,033 1,337,370 Total long-term borrowings totaled $ 534.8 million and $ 134.9 million as of December 31, 2023 and December 31, 2022, respectively, while total short-term borrowings totaled $ 1.44 billion and $ 1.20 billion for the same periods. As of December 31, 2023, FHLB advances were at fixed rates and mature between January 2024 and September 2027, and as of December 31, 2022, FHLB advances were at fixed rates and mature between January 2023 and July 2025. These advances are secured by loans receivable under a blanket collateral agreement. In March 2023, the Bank established a facility under the BTFP with the Federal Reserve Bank of New York. The Bank pledged approximately $ 589.1 million in security collateral to the facility improving its access to immediate funding. Advances under the Program can be requested until March 11, 2024. We elected to participate in the BTFP program due to significant cost savings compared to other wholesale funding sources. The funding was used to pay off existing wholesale borrowings. The ability to prepay at any time without penalty also enhances our ability to manage our interest rate risk position. Scheduled maturities of FHLB advances and lines of credit as of December 31, 2023 are as follows (in thousands): 2023 Due in one year or less $ 1,063,065 Due after one year through two years 502,362 Due after two years through three years 157,445 Due after three years through four years 175,000 Due after four years through five years — Thereafter — Total FHLB advances and lines of credit $ 1,897,872 Scheduled maturities of securities sold under repurchase agreements as of December 31, 2023 are as follows (in thousands): 2023 Due in one year or less $ 72,161 Thereafter — Total securities sold under repurchase agreements $ 72,161 107 The following tables set forth certain information as to borrowed funds for the years ended December 31, 2023 and 2022 (in thousands): Maximum balance Average balance Weighted average interest rate 2023 Securities sold under repurchase agreements $ 99,669 87,227 1.69 % FHLB line of credit 500,000 262,289 5.29 FHLB advances 1,592,277 1,282,124 3.14 FED BTFP Borrowing 450,000 4,932 4.83 2022 Securities sold under repurchase agreements $ 125,506 113,550 0.38 % FHLB line of credit 486,000 139,012 3.32 FHLB advances 753,370 503,713 0.85 Securities sold under repurchase agreements include arrangements with deposit customers of the Bank to sweep funds into short-term borrowings. The Bank uses available for sale debt securities to pledge as collateral for the repurchase agreements. As of December 31, 2023 and December 31, 2022, the fair value of securities pledged to secure public deposits, repurchase agreements, lines of credit, FHLB advances and other purposes required by law, totaled $ 924.6 million and $ 1.59 billion, respectively. Additionally, as of December 31, 2023, the par value of securities pledged to secure the BTFP was $ 589.1 million. Interest expense on borrowings for the years ended December 31, 2023, 2022 and 2021 amounted to $ 55.9 million, $ 9.3 million and $ 8.6 million, respectively. (12) Subordinated Debentures Sussex Capital Trust II, a non-consolidated subsidiary of the Company acquired as part of the SB One acquisition and a Delaware statutory business trust established on June 28, 2007, issued $ 12.5 million of variable rate capital trust pass-through securities to investors. In accordance with FASB ASC 810, Consolidation, Sussex Capital Trust II, is not included in our consolidated financial statements. For regulatory reporting purposes, capital trust pass-through securities qualify as Tier I capital subject to specified limitations. Subordinated debentures as of December 31, 2023 and 2022 totaled $ 10.7 million and $ 10.5 million, respectively, while interest expense on these subordinated debentures for the year ended December 31, 2023, 2022 and 2021 totaled $ 1.1 million, $ 615,000 and $ 1.2 million, respectively . (13) Benefit Plans Pension and Post-retirement Benefits 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 pension 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. Based on the measurement date of December 31, 2023, no contributions will be made to the pension plan in 2024. 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. 108 The following table sets forth information regarding the pension plan and post-retirement healthcare and life insurance plans (in thousands): Pension Post-retirement 2023 2022 2021 2023 2022 2021 Change in benefit obligation: Benefit obligation at beginning of year $ 24,550 32,517 35,170 12,095 16,748 18,805 Service cost — — — 13 28 34 Interest cost 1,208 855 790 600 443 424 Actuarial (gain) loss ( 149 ) ( 48 ) ( 294 ) ( 357 ) 140 ( 412 ) Benefits paid ( 1,648 ) ( 1,658 ) ( 1,656 ) ( 658 ) ( 933 ) ( 584 ) Change in actuarial assumptions 462 ( 7,116 ) ( 1,493 ) ( 349 ) ( 4,331 ) ( 1,519 ) Benefit obligation at end of year $ 24,423 24,550 32,517 11,344 12,095 16,748 Change in plan assets: Fair value of plan assets at beginning of year $ 47,930 58,451 54,617 — — — Actual (loss) return on plan assets 6,452 ( 8,863 ) 5,490 — — — Employer contributions — — — 658 933 584 Benefits paid ( 1,648 ) ( 1,658 ) ( 1,656 ) ( 658 ) ( 933 ) ( 584 ) Fair value of plan assets at end of year 52,734 47,930 58,451 — — — Funded status at end of year $ 28,311 23,380 25,934 ( 11,344 ) ( 12,095 ) ( 16,748 ) For the years ended December 31, 2023 and 2022, the Company, in the measurement of its pension plan and post-retirement obligations updated its mortality assumptions to the PRI 2012 mortality table with the fully generational projection scale MP 2021 issued by The Society of Actuaries ("SOA") in October 2021. The prepaid pension benefits of $ 28.3 million and the unfunded post-retirement healthcare and life insurance benefits of $ 11.3 million as of December 31, 2023 are included in other assets and other liabilities, respectively, in the Consolidated Statements of Financial Condition. The components of accumulated other comprehensive loss (income) related to the pension plan and other post-retirement benefits, on a pre-tax basis, as of December 31, 2023 and 2022 are summarized in the following table (in thousands): Pension Post-retirement 2023 2022 2023 2022 Unrecognized prior service cost $ — — — — Unrecognized net actuarial loss (income) 5,633 9,658 ( 10,378 ) ( 11,802 ) Total accumulated other comprehensive loss (income) $ 5,633 9,658 ( 10,378 ) ( 11,802 ) 109 Net periodic (benefit) increase cost for the years ending December 31, 2023, 2022 and 2021, included the following components (in thousands): Pension Post-retirement 2023 2022 2021 2023 2022 2021 Service cost $ — — — 13 28 34 Interest cost 1,208 855 790 600 443 424 Return on plan assets ( 2,824 ) ( 3,456 ) ( 3,227 ) — — — Amortization of: Net loss (gain) 709 — 472 ( 2,130 ) ( 1,304 ) ( 1070 ) Unrecognized prior service cost — — — — — — Net periodic (benefit) increase cost $ ( 907 ) ( 2,601 ) ( 1,965 ) ( 1,517 ) ( 833 ) ( 612 ) The weighted average actuarial assumptions used in the plan determinations as of December 31, 2023, 2022 and 2021 were as follows: Pension Post-retirement 2023 2022 2021 2023 2022 2021 Discount rate 4.90 % 5.10 % 2.70 % 4.90 % 5.10 % 2.70 % Rate of compensation increase — — — — — — Expected return on plan assets 6.00 6.00 6.00 — — — Medical and life insurance benefits cost rate of increase — — — 5.50 6.00 6.00 The Company provides its actuary with certain rate assumptions used in measuring the benefit obligation. The most significant of these is the discount rate used to calculate the period-end present value of the benefit obligations, and the expense to be included in the following year’s financial statements. A lower discount rate will result in a higher benefit obligation and expense, while a higher discount rate will result in a lower benefit obligation and expense. The discount rate assumption was determined based on a cash flow-yield curve model specific to the Company’s pension and post-retirement plans. The Company compares this rate to certain market indices, such as long-term treasury bonds, or the Citigroup pension liability indices, for reasonableness. A discount rate of 4.90 % was selected for the December 31, 2023 measurement date. Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A 1% change in the assumed health care cost trend rate would have had the following effects on post-retirement benefits as of December 31, 2023 (in thousands): 1% increase 1% decrease Effect on total service cost and interest cost $ 60 ( 50 ) Effect on post-retirement benefits obligation $ 1,200 ( 1,000 ) Estimated future benefit payments, which reflect expected future service, as appropriate for the next five years, are as follows (in thousands): Pension Post-retirement 2024 $ 1,757 681 2025 1,766 717 2026 1,768 720 2027 1,776 741 2028 1,779 746 110 The weighted-average asset allocation of pension plan assets as of December 31, 2023 and 2022 were as follows: Asset Category 2023 2022 Domestic equities 38 % 37 % Foreign equities 11 % 11 % Fixed income 49 % 50 % Real estate 2 % 2 % Cash — % — % Total 100 % 100 % The Company’s expected return on pension plan assets assumption is based on historical investment return experience and evaluation of input from the Plan's Investment Consultant and the Company's Benefits Committee which manages the pension plan’s assets. The expected return on pension plan assets is also impacted by the target allocation of assets, which is based on the Company’s goal of earning the highest rate of return while maintaining risk at acceptable levels. Management strives to have pension plan assets sufficiently diversified so that adverse or unexpected results from one security class will not have a significant detrimental impact on the entire portfolio. The target allocation of assets and acceptable ranges around the targets are as follows: Asset Category Target Allowable Range Domestic equities 37 % 30 - 41 % Foreign equities 11 % 5 - 13 % Fixed income 50 % 40 - 65 % Real estate 2 % 0 - 4 % Cash 0 % 0 % Total 100 % The Company anticipates that the long-term asset allocation on average will approximate the targeted allocation. Actual asset allocations are the result of investment decisions by a third-party investment manager. The following tables present the assets that are measured at fair value on a recurring basis by level within the GAAP fair value hierarchy as reported on the statements of net assets available for Plan benefits as of December 31, 2023 and 2022, respectively (in thousands): Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 111 Fair value measurements as of December 31, 2023 Total (Level 1) (Level 2) (Level 3) Group annuity contracts $ 76 — 76 — Mutual funds: Fixed income 25,728 25,728 — — International equity 5,713 5,713 — — Large U.S. equity 1,577 1,577 — — Small/Mid U.S. equity 1,114 1,114 — — Total mutual funds 34,132 34,132 — — Pooled separate accounts 18,526 — 18,526 — Total Plan assets $ 52,734 34,132 18,602 — Fair value measurements as of December 31, 2022 Total (Level 1) (Level 2) (Level 3) Group annuity contracts $ 92 — 92 — Mutual funds: Fixed income 23,819 23,819 — — International equity 5,362 5,362 — — Large U.S. equity 1,433 1,433 — — Small/Mid U.S. equity 929 929 — — Total mutual funds 31,543 31,543 — — Pooled separate accounts 16,295 — 16,295 — Total Plan assets $ 47,930 31,543 16,387 — 401(k) Plan The Bank has a 401(k) plan covering substantially all employees of the Bank. For 2023, 2022 and 2021, the Bank matched 25 % of the first 6 % contributed by the participants. The contribution percentage is determined by the board of directors in its sole discretion. The Bank’s aggregate contributions to the 401(k) Plan for 2023, 2022 and 2021 were $ 1.3 million, $ 1.2 million and $ 1.2 million, respectively. Supplemental Executive Retirement Plan The Bank maintains a non-qualified supplemental retirement plan for certain senior officers of the Bank. This unfunded plan, which was frozen as of April 1, 2003, provides benefits in excess of the benefits permitted to be paid by the pension plan under provisions of the tax law. Amounts expensed under this supplemental retirement plan amounted to $ 73,000 , $ 73,000 and $ 74,000 for the years 2023, 2022 and 2021, respectively. As of December 31, 2023 and 2022, $ 1.6 million and $ 1.7 million, respectively, were recorded in other liabilities on the Consolidated Statements of Financial Condition for this supplemental retirement plan. In connection with this supplemental retirement plan, there was no change recorded in other comprehensive income (loss) for 2023, while an increase of $ 283,000 and an increase of $ 68,000 , net of tax, were recorded for 2022 and 2021, respectively. Retirement Plan for the Board of Directors of Provident Bank The Bank maintains a Retirement Plan for the board of directors of the Bank, a non-qualified plan that provides cash payments for up to 10 years to eligible retired board members based on age and length of service requirements. The maximum payment under this plan to a board member, who terminates service on or after the age of 72 with at least ten years of service on the board, is forty quarterly payments of $ 1,250 . The Bank may suspend payments under this plan if it does not meet Federal Deposit Insurance Corporation or New Jersey Department of Banking and Insurance minimum capital requirements. The Bank may terminate this plan at any time although such termination may not reduce or eliminate any benefit previously accrued to a board member without his or her consent. The plan was amended in December 2005 to terminate benefits under this plan for any directors who had less than ten years of service on the board of directors of the Bank as of December 31, 2006. 112 The plan further provides that, in the event of a change in control (as defined in the plan), the undistributed balance of a director’s accrued benefit will be distributed to him or her within 60 days of the change in control. The Bank paid $ 5,000 , $ 5,000 , and $ 6,250 to former board members under this plan for each of the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023 and 2022, $ 126,000 and $ 125,000 , respectively, were recorded in other liabilities on the Consolidated Statements of Financial Condition for this retirement plan. A decrease of $ 7,000 , net of tax, was recorded in other comprehensive income for 2023, while increases of $ 11,000 and $ 689 , net of tax, were recorded for 2022 and 2021, respectively, in connection with this plan. Employee Stock Ownership Plan The ESOP is a tax-qualified plan designed to invest primarily in the Company’s common stock that provides employees with the opportunity to receive a funded retirement benefit from the Bank, based primarily on the value of the Company’s common stock. The ESOP purchased 4,769,464 shares of the Company’s common stock at an average price of $ 17.09 per share with the proceeds of a loan from the Company to the ESOP. The outstanding loan principal as of December 31, 2023, was $ 6.4 million. Shares of the Company’s common stock pledged as collateral for the loan are released from the pledge for allocation to participants as loan payments are made. For the years ending December 31, 2023 and 2022, 311,946 shares and 299,566 shares from the ESOP were released, respectively. Unallocated ESOP shares held in suspense totaled 286,562 as of December 31, 2023, and had a fair value of $ 5.2 million. ESOP compensation expense for the years ended December 31, 2023, 2022 and 2021 was $ 3.1 million, $ 4.1 million and $ 4.3 million, respectively. Non-Qualified Supplemental Defined Contribution Plan (“the Supplemental Employee Stock Ownership Plan”) Effective January 1, 2004, the Bank established a deferred compensation plan for executive management and key employees of the Bank, known as Provident Bank Non-Qualified Supplemental Employee Stock Ownership Plan (the “Supplemental ESOP”). The Supplemental ESOP was amended and restated as the Non-Qualified Supplemental Defined Contribution Plan (the “Supplemental DC Plan”), effective January 1, 2010. The Supplemental DC Plan is a non-qualified plan that provides additional benefits to certain executives whose benefits under the 401(k) Plan and ESOP are limited by tax law limitations applicable to tax-qualified plans. The Supplemental DC Plan requires a contribution by the Bank for each participant who also participates in the 401(k) Plan and ESOP equal to the amount that would have been contributed under the terms of the 401(k) Plan and ESOP but for the tax law limitations, less the amount actually contributed under the 401(k) Plan and ESOP. The Supplemental DC Plan provides for a phantom stock allocation for qualified contributions that may not be accrued in the qualified ESOP and for matching contributions that may not be accrued in the qualified 401(k) Plan due to tax law limitations. Under the Supplemental 401(k) provision, the estimated (benefit) expense for the years ending December 31, 2023, 2022 and 2021 was $ 262,000 , $ 312,000 and $ 25,000 , respectively, and included the matching contributions plus interest credited at an annual rate equal to the ten-year bond-equivalent yield on U.S. Treasury securities. Under the Supplemental ESOP provision, the estimated expense for the years ending December 31, 2023, 2022 and 2021 was $ 432,000 , $ 144,000 and $ 180,000 , respectively. The phantom equity is treated as equity awards (expensed at the time of allocation) and not liability awards which would require periodic adjustment to market, as participants do not have an option to take their distribution in cash. 2019 Long-Term Equity Incentive Plan Upon stockholders’ approval of the 2019 Long-Term Equity Incentive Plan on April 25, 2019, shares available for stock awards and stock options under the Amended and Restated Long-Term Incentive Plan were reserved for issuance under the new 2019 Long-Term Equity Incentive Plan. No additional grants of stock awards and stock options will be made under the Amended and Restated Long-Term Incentive Plan. The new plan authorized the issuance of up to 1,350,000 shares of Company common stock to be issued as stock awards. As of December 31, 2023, 749,860 shares remain available for grant under the plan. Shares previously awarded under prior equity incentive plans that are subsequently forfeited or expire may also be issued under this new plan. Stock Awards 113 As a general rule, restricted stock grants are held in escrow for the benefit of the award recipient until vested. Awards outstanding generally vest in three annual installments, commencing one year from the date of the award. Additionally, certain awards are three-year performance-vesting awards, which may or may not vest depending upon the attainment of certain corporate financial targets. Expense attributable to stock awards amounted to $ 7.6 million, $ 9.4 million and $ 5.5 million for the years ended December 31, 2023, 2022 and 2021, respectively. A summary status of the granted but unvested stock awards as of December 31, and changes during the year, is presented below: Restricted Stock Awards 2023 2022 2021 Outstanding at beginning of year 1,023,130 900,483 785,181 Granted 427,053 447,526 500,892 Forfeited ( 328,761 ) ( 105,556 ) ( 144,476 ) Vested ( 68,330 ) ( 219,323 ) ( 241,114 ) Outstanding at the end of year 1,053,092 1,023,130 900,483 As of December 31, 2023, unrecognized compensation cost relating to unvested restricted stock totaled $ 7.1 million. This amount will be recognized over a remaining weighted average period of 1.6 years. Stock Options Each stock option granted entitles the holder to purchase one share of the Company’s common stock at an exercise price not less than the fair value of a share of the Company’s common stock at the date of grant. Options generally vest over a five-year period from the date of grant and expire no later than 10 years following the grant date. Additionally, certain options are three-year performance-vesting options, which may or may not vest depending upon the attainment of certain corporate financial targets. A summary of the status of the granted but unexercised stock options as of December 31, 2023, 2022 and 2021, and changes during the year is presented below: 2023 2022 2021 Number of stock options Weighted average exercise price Number of stock options Weighted average exercise price Number of stock options Weighted average exercise price Outstanding at beginning of year 600,806 $ 19.01 566,453 $ 18.73 596,441 $ 17.96 Granted — — 34,353 23.70 56,605 20.66 Exercised ( 51,881 ) 15.23 — — ( 86,593 ) 14.69 Forfeited — — — — — — Expired — — — — — — Outstanding at the end of year 548,925 $ 19.37 600,806 $ 19.01 566,453 $ 18.73 The total fair value of options vesting during 2023, 2022 and 2021 was $ 198,000 , $ 195,000 and $ 190,000 , respectively. Compensation expense of approximately $ 77,000 and $ 11,000 is projected for 2024 and 2025 respectively, on stock options outstanding as of December 31, 2023. No compensation expense is projected for 2026 on stock options outstanding as of December 31, 2023. The following table summarizes information about stock options outstanding as of December 31, 2023: 114 Options Outstanding Options Exercisable Range of exercise prices Number of options outstanding Average remaining contractual life Weighted average exercise price Number of options exercisable Weighted average exercise price $ 15.23 - 18.70 223,061 1.1 $ 17.75 223,061 $ 17.75 $ 20.62 - 27.25 325,864 5.8 $ 23.20 284,094 $ 23.33 The stock options outstanding and stock options exercisable as of December 31, 2023, both had an aggregate intrinsic value of $ 133,000 . The expense related to stock options is based on the fair value of the options at the date of the grant and is recognized ratably over the vesting period of the options. Compensation expense related to the Company’s stock option plan totaled $ 144,000 , $ 198,000 and $ 200,000 for 2023, 2022 and 2021, respectively. The estimated fair values were determined on the dates of grant using the Black-Scholes Option pricing model. The fair value of the Company’s stock option awards are expensed on a straight-line basis over the vesting period of the stock option. The risk-free rate is based on the implied yield on a U.S. Treasury bond with a term approximating the expected term of the option. The expected volatility computation is based on historical volatility over a period approximating the expected term of the option. The dividend yield is based on the annual dividend payment per share, divided by the grant date stock price. The expected option term is a function of the option life and the vesting period. The fair value of the option grants was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: For the year ended December 31, 2022 2021 Expected dividend yield 4.05 % 4.45 % Expected volatility 36.33 % 30.75 % Risk-free interest rate 1.74 % 0.73 % Expected option life 8 years 8 years There were no options granted during 2023, while the weighted average fair value of options granted during 2022 and 2021 was $ 5.80 and $ 3.52 per option, respectively. (14) Income Taxes 115 The current and deferred amounts of income tax expense (benefit) for the years ended December 31, 2023, 2022 and 2021 are as follows (in thousands): Years ended December 31, 2023 2022 2021 Current: Federal $ 31,972 41,379 28,798 State 12,684 20,859 17,986 Total current income tax expense 44,656 62,238 46,784 Deferred: Federal 905 1,825 10,548 State 1,820 395 1,865 Total deferred income tax expense 2,725 2,220 12,413 Total income tax expense $ 47,381 64,458 59,197 The Company recorded a deferred tax expense (benefit) of $ 11.1 million, ($ 68.2 ) million and ($ 8.3 ) million during 2023, 2022 and 2021, respectively, related to the unrealized gains (losses) on available for sale debt securities, which is reported in accumulated other comprehensive income (loss), net of tax. The Company recorded a deferred tax (benefit) expense of ($ 3.9 ) million, $ 6.2 million and $ 3.1 million in 2023, 2022 and 2021, respectively, related to the unrealized gains (losses) on cash flow hedge advances, which is reported in accumulated other comprehensive income (losses), net of tax. Also, the Company recorded a deferred tax expense (benefit) of $ 884,000 , $( 517,000 ) and $ 1.4 million in 2023, 2022 and 2021, respectively, related to the amortization of post-retirement benefit obligations, which is reported in accumulated other comprehensive income (loss), net of tax. A reconciliation between the amount of reported total income tax expense and the amount computed by multiplying the applicable statutory income tax rate is as follows (in thousands): Years ended December 31, 2023 2022 2021 Tax expense at statutory rates $ 36,932 50,422 47,695 Increase (decrease) in taxes resulting from: State tax, net of federal income tax benefit 11,313 16,791 15,682 Tax-exempt interest income ( 2,514 ) ( 2,590 ) ( 2,690 ) Bank-owned life insurance ( 1,361 ) ( 1,257 ) ( 1,665 ) Other, net 3,011 1,092 175 Total income tax expense $ 47,381 64,458 59,197 The net deferred tax asset is included in other assets in the Consolidated Statements of Financial Condition. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2023 and 2022 are as follows (in thousands): 116 2023 2022 Deferred tax assets: Allowance for credit losses on loans $ 28,404 23,794 Allowance for credit loss on off-balance sheet ("OBS") credit exposure 924 853 Post-retirement benefit 5,758 6,458 Deferred compensation 384 569 Depreciation 1,126 1,412 SERP 1,137 1,130 ESOP 402 812 Stock-based compensation 2,963 5,818 Non-accrual interest 172 234 Federal Net Operating Loss ("NOL") 160 197 Unrealized losses on available for sale debt securities 57,198 68,324 Lease liability 15,914 17,126 Other 112 — Total gross deferred tax assets 114,654 126,727 Deferred tax liabilities: Pension expense 8,997 8,928 Contingent consideration 283 162 Deferred loan costs 11,376 8,533 Investment securities, principally due to accretion of discounts 66 95 Purchase accounting adjustments 371 363 Intangibles 1,620 1,366 Originated mortgage servicing rights 147 169 Pension liability adjustments 1,459 575 Net unrealized gain on hedging activities 3,674 7,576 Lease right-of-use asset 15,084 16,370 Other — 361 Total gross deferred tax liabilities 43,077 44,498 Net deferred tax asset $ 71,577 82,229 Retained earnings as of December 31, 2023 includes approximately $ 51.8 million for which no provision for income tax has been made. This amount represents an allocation of income to bad debt deductions for tax purposes only. Events that would result in taxation of these reserves include the failure to qualify as a bank for tax purposes, distributions in complete or partial liquidation, stock redemptions and excess distributions to stockholders. As of December 31, 2023, the Company had an unrecognized tax liability of $ 14.0 million with respect to this reserve. As a result of the Beacon acquisition in 2011, the Company acquired federal net operating loss carryforwards. There are approximately $ 760,000 of NOL carryforwards available to offset future taxable income as of December 31, 2023. If not utilized, these carryforwards will expire in 2031. The federal NOLs are subject to a combined annual Code Section 382 limitation in the amount of approximately $ 197,000 . Management has determined that it is more likely than not that it will realize the net deferred tax asset based upon the nature and timing of the items listed above. In order to fully realize the net deferred tax asset, the Company will need to generate future taxable income. Management has projected that the Company will generate sufficient taxable income to utilize the net deferred tax asset; however, there can be no assurance that such levels of taxable income will be generated. The Company’s policy is to report interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The Company did not have any liabilities for uncertain tax positions as of December 31, 2023 and 2022. 117 The Company and its subsidiaries file a consolidated U.S. Federal income tax return. For tax periods prior to December 31, 2018, New Jersey tax law does not and has not allowed for a taxpayer to file a tax return on a combined or consolidated basis with another member of the affiliated group where there is common ownership . The Company and its subsidiaries is required to file a combined New Jersey state income tax return on apportioned and allocated income. Also, the Company and its subsidiaries file a combined New York State income tax return on apportioned and allocated income. The Company, through its bank subsidiary, files a Pennsylvania Mutual Thrift Institution Tax return. The Company's Federal and Pennsylvania Mutual Thrift Institutions tax returns are open for examination from 2020. The Company's New York State tax returns are open for examination from 2020. The Company's New Jersey State tax returns are open for examination from 2019. (15) Commitments and Concentrations of Credit Risk In the normal course of conducting its business, the Bank extends credit to meet the financing needs of its customers through commitments. Commitments and contingent liabilities, such as commitments to extend credit (including loan commitments of $ 2.09 billion and $ 2.06 billion as of December 31, 2023 and 2022, respectively, and undisbursed home equity and personal credit lines of $ 273.0 million and $ 279.2 million, as of December 31, 2023 and 2022, respectively, are not reflected in the accompanying consolidated financial statements. These instruments involve elements of credit and interest rate risk in excess of the amount recognized in the consolidated financial statements. The Bank uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance sheet loans. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the borrower. The Bank grants residential real estate loans on single- and multi-family dwellings to borrowers primarily in New Jersey. Its borrowers’ abilities to repay their obligations are dependent upon various factors, including the borrowers’ income and net worth, cash flows generated by the underlying collateral and value of the underlying collateral. Such factors are dependent upon various economic conditions and individual circumstances beyond the Bank’s control; the Bank is therefore subject to risk of loss. The Bank believes that its lending policies and procedures adequately minimize the potential exposure to such risks and that adequate provisions for loan losses are provided for all known and inherent risks. Collateral and/or guarantees are required for virtually all loans. A substantial portion of the Bank’s loans are to borrowers operating in or, are secured by real estate located in New Jersey, our primary market area. Accordingly, the collectability of a substantial portion of the Bank’s loan portfolio may be susceptible to changes in local real estate market conditions and the regional business environment. 118 (16) Contingencies In the normal course of business, various commitments and contingent liabilities are outstanding which are not reflected in the accompanying consolidated financial statements. In the opinion of management, the consolidated financial position of the Company will not be materially affected by the outcome of such commitments or contingent liabilities. The Company is involved in various litigation and claims arising in the normal course of business. Liabilities for loss contingencies arising from such litigation and claims are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. On May 2, 2022, a purported class action complaint was filed against the Bank in the Superior Court of New Jersey, which alleges that the Bank wrongfully assessed overdraft fees related to debit card transactions. The complaint asserts claims for breach of contract and breach of the covenant of good faith and fair dealing as well as an alleged violation of the New Jersey Consumer Fraud Act. Plaintiff seeks to represent a proposed class of all the Bank's checking account customers who were charged overdraft fees on transactions that were authorized into a positive available balance. Plaintiff seeks unspecified damages, costs, attorneys’ fees, pre-judgment interest, an injunction, and other relief as the Court deems proper for the plaintiff and the proposed class. The Bank denies the allegations and is vigorously defending the matter. The parties had an initial mediation meeting on October 20, 2023, and the matter remains pending. Although the Bank is vigorously defending the litigation, the ultimate outcome of this litigation, such as whether the likelihood of loss is remote, reasonably possible, or probable, or if and when the reasonably possible range of loss is estimable, is inherently uncertain. As a result of this, a $ 3.0 million charge was recorded in the fourth quarter of 2023 for estimated contingent litigation reserves. 119 (17) Regulatory Capital Requirements FDIC regulations require banks to maintain minimum levels of regulatory capital. Under the regulations in effect as of December 31, 2023, the Bank is required to maintain: (1) a Tier 1 capital to total assets leverage ratio of 4.0 %; (2) a common equity Tier 1 capital to risk-based assets ratio of 4.5 %; (3) a Tier 1 capital to risk-based assets ratio of 6.0 %; and (4) a total capital to risk-based assets ratio of 8.0 %. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.5 % of common equity Tier 1 capital to risk-weighted asset above the amount necessary to meet its minimum risk-based capital requirements. Under its prompt corrective action regulations, the FDIC is required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution. Such actions could have a direct material effect on an institution’s financial statements. The regulations establish a framework for the classification of savings institutions into five categories: well capitalized; adequately capitalized; undercapitalized, significantly undercapitalized; and critically undercapitalized. Generally, an institution is considered well capitalized if it has: a leverage (Tier 1) capital ratio of at least 5.00 %; a common equity Tier 1 risk-based capital ratio of 6.50 %; a Tier 1 risk-based capital ratio of at least 8.00 %; and a total risk-based capital ratio of at least 10.00 %. In the first quarter of 2020, U.S. federal regulatory authorities issued an interim final rule providing banking institutions that adopt CECL during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition in total). In connection with its adoption of CECL on January 1, 2020, the Company elected to utilize the five-year CECL transition. The foregoing capital ratios are based in part on specific quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the FDIC about capital components, risk weightings and other factors. As of December 31, 2023 and 2022, the Bank exceeded all minimum capital adequacy requirements to which it is subject. Further, the most recent FDIC notification categorized the Bank as a well-capitalized institution under the prompt corrective action regulations. There have been no conditions or events since that notification that management believes have changed the Bank’s capital classification. The Company is regulated as a bank holding company, and as such, is subject to examination, regulation and periodic reporting under the Bank Holding Company Act, as administered by the Federal Reserve Board (“FRB”). The FRB has adopted capital adequacy guidelines for bank holding companies on a consolidated basis substantially similar to those of the FDIC for the Bank. As of December 31, 2023 and 2022, the Company was “well capitalized” under FRB guidelines. Regulations of the FRB provide that a bank holding company must serve as a source of strength to any of its subsidiary banks and must not conduct its activities in an unsafe or unsound manner. Under the prompt corrective action provisions discussed above, a bank holding company parent of an undercapitalized subsidiary bank would be directed to guarantee, within limitations, the capital restoration plan that is required of such an undercapitalized bank. If the undercapitalized bank fails to file an acceptable capital restoration plan or fails to implement an accepted plan, the FRB may prohibit the bank holding company parent of the undercapitalized bank from paying any dividend or making any other form of capital distribution without the prior approval of the FRB. The following table shows the Company’s actual capital amounts and ratios as of December 31, 2023 and 2022, compared to the FRB minimum capital adequacy requirements and the FRB requirements for classification as a well-capitalized institution (dollars in thousands). 120 Actual capital FRB minimum capital adequacy requirements FRB minimum capital adequacy requirements with capital conservation buffer To be well-capitalized under prompt corrective action provisions Amount Ratio Amount Ratio Amount Ratio Amount Ratio As of December 31, 2023 Tier 1 leverage capital $ 1,396,512 10.22 % $ 546,662 4.00 % $ 546,662 4.00 % $ 683,327 5.00 % Common equity Tier 1 risk-based capital 1,383,625 11.45 543,720 4.50 845,786 7.00 785,373 6.50 Tier 1 risk-based capital 1,396,512 11.56 724,959 6.00 1,027,026 8.50 966,612 8.00 Total risk-based capital 1,496,545 12.39 966,612 8.00 1,268,679 10.50 1,208,266 10.00 Actual capital FRB minimum capital adequacy requirements FRB minimum capital adequacy requirements with capital conservation buffer To be well-capitalized under prompt corrective action provisions Amount Ratio Amount Ratio Amount Ratio Amount Ratio As of December 31, 2022 Tier 1 leverage capital $ 1,326,676 10.00 % $ 530,610 4.00 % $ 530,610 4.00 % $ 663,262 5.00 % Common equity Tier 1 risk-based capital 1,313,789 11.36 520,312 4.50 809,374 7.00 751,562 6.50 Tier 1 risk-based capital 1,326,676 11.47 693,749 6.00 982,812 8.50 924,999 8.00 Total risk-based capital 1,404,466 12.15 924,999 8.00 1,214,061 10.50 1,156,249 10.00 The following table shows the Bank’s actual capital amounts and ratios as of December 31, 2023 and 2022, compared to the FDIC minimum capital adequacy requirements and the FDIC requirements for classification as a well-capitalized institution (dollars in thousands). Actual capital FDIC minimum capital adequacy requirements FDIC minimum capital adequacy requirements with capital conservation buffer To be well-capitalized under prompt corrective action provisions Amount Ratio Amount Ratio Amount Ratio Amount Ratio As of December 31, 2023 Tier 1 leverage capital $ 1,343,223 9.84 % $ 546,168 4.00 % $ 546,168 4.00 % $ 682,709 5.00 % Common equity Tier 1 risk-based capital 1,343,223 11.12 543,465 4.50 845,390 7.00 785,005 6.50 Tier 1 risk-based capital 1,343,223 11.12 724,620 6.00 1,026,545 8.50 966,160 8.00 Total risk-based capital 1,443,256 11.95 966,160 8.00 1,268,085 10.50 1,207,700 10.00 Actual capital FDIC minimum capital adequacy requirements FRB minimum capital adequacy requirements with capital conservation buffer To be well-capitalized under prompt corrective action provisions Amount Ratio Amount Ratio Amount Ratio Amount Ratio As of December 31, 2022 Tier 1 leverage capital $ 1,260,603 9.51 % $ 530,396 4.00 % $ 530,396 4.00 % $ 662,995 5.00 % Common equity Tier 1 risk-based capital 1,260,603 10.91 520,070 4.50 808,998 7.00 751,213 6.50 Tier 1 risk-based capital 1,260,603 10.91 693,427 6.00 982,355 8.50 924,569 8.00 Total risk-based capital 1,338,393 11.58 924,569 8.00 1,213,497 10.50 1,155,712 10.00 121 (18) 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 years ended December 31, 2023, 2022 and 2021, the Company recorded a $ 264,000 provision, a $ 3.4 million negative provision and a $ 1.5 million provision for credit losses for off-balance sheet credit exposures, respectively. The allowance for credit losses for off-balance sheet credit exposures was $ 3.4 million and $ 3.2 million as of December 31, 2023 and 2022, respectively, and included in other liabilities on the Consolidated Statements of Financial Condition. (19) 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, the Company 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 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 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 December 31, 2023 and December 31, 2022. Available for Sale Debt Securities, at Fair Value For available for sale debt securities, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third-party data service providers or dealer market participants with whom the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to 122 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. The Company also holds debt instruments issued by the U.S. government that are traded in active markets with readily accessible quoted market prices that are considered Level 1 within the fair value hierarchy. Equity Securities, at Fair Value The Company holds equity securities that are traded in active markets with readily determinable fair value using quoted market prices. Derivatives The Company records all derivatives on the statements of financial condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. The Company has interest rate derivatives resulting from a service provided to certain qualified borrowers in a loan related transaction which, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. As such, all changes in fair value of these derivatives are recognized directly in earnings. The Company also uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges, and which satisfy hedge accounting requirements, involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. These derivatives were used to hedge the variable cash outflows associated with FHLBNY borrowings and brokered demand deposits. The change in the fair value of these derivatives is recorded in accumulated other comprehensive income (loss), and is subsequently reclassified into earnings in the period that the forecasted transactions affect earnings. The fair value of the Company's derivatives is determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs. Assets Measured at Fair Value on a Non-Recurring Basis The valuation techniques described below were used to estimate fair value of financial instruments measured on a non-recurring basis as of December 31, 2023 and 2022. Collateral Dependent Impaired Loans For loans measured for impairment based on the fair value of the underlying collateral, fair value was estimated using a market approach. The Company measures the fair value of collateral underlying impaired loans primarily through obtaining independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments, on an individual case-by-case basis, to comparable assets based on the appraisers’ market knowledge and experience, as well as adjustments for estimated costs to sell between 5 % and 10 %. Management classifies these loans as Level 3 within the fair value hierarchy. Foreclosed Assets Assets acquired through foreclosure or deed in lieu of foreclosure are carried at the lower of the outstanding loan balance at the time of foreclosure or 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 123 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 during the years ended December 31, 2023 and 2022. The following tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair value as of December 31, 2023 and 2022, by level within the fair value hierarchy (in thousands): Fair Value Measurements at Reporting Date Using: December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Measured on a recurring basis: Available for sale debt securities: U.S. Treasury obligations $ 253,878 $ 253,878 — — Agency guaranteed obligations 27,498 — 27,498 — Mortgage-backed securities 1,285,609 — 1,285,609 — Asset-backed securities 32,235 — 32,235 — State and municipal obligations 56,584 — 56,584 — Corporate obligations 34,308 — 34,308 — Total available for sale debt securities $ 1,690,112 253,878 1,436,234 — Equity Securities 1,270 1,270 — — Derivative assets 101,754 — 101,754 $ 1,793,136 255,148 1,537,988 — Derivative liabilities $ 88,835 — 88,835 — Measured on a non-recurring basis: Loans measured for impairment based on the fair value of the underlying collateral $ 24,139 — — 24,139 Foreclosed assets 11,651 — — 11,651 $ 35,790 — — 35,790 124 Fair Value Measurements at Reporting Date Using: December 31, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Measured on a recurring basis: Available for sale debt securities: U.S. Treasury obligations $ 245,816 245,816 — — Mortgage-backed securities 1,427,139 — 1,427,139 — Asset-backed securities 37,621 — 37,621 — State and municipal obligations 56,864 — 56,864 — Corporate obligations 36,108 — 36,108 — Total available for sale debt securities $ 1,803,548 245,816 1,557,732 — Equity Securities 1,147 1,147 — — Derivative assets 148,151 — 148,151 — $ 1,952,846 246,963 1,705,883 — Derivative liabilities $ 120,896 — 120,896 — Measured on a non-recurring basis: Loans measured for impairment based on the fair value of the underlying collateral $ 23,988 — — 23,988 Foreclosed assets 2,124 — — 2,124 $ 26,112 — — 26,112 There were no transfers between Level 1, Level 2 and Level 3 during the years ended December 31, 2023 and 2022. Other Fair Value Disclosures The Company is required to disclose estimated fair value of financial instruments, both assets and liabilities on and off 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. As of December 31, 2023 and December 31, 2022, $ 70,000 was included in cash and cash equivalents, representing cash collateral pledged to secure loan level swaps and risk participation agreements. Held to Maturity Debt Securities, Net of Allowance for Credit Losses 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-sponsored agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 within the fair value hierarchy. 125 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 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. 126 The following tables present the Company’s financial instruments at their carrying and fair values as of December 31, 2023 and December 31, 2022. Fair values are presented by level within the fair value hierarchy: Fair Value Measurements as of December 31, 2023 Using: (Dollars in thousands) Carrying value Fair value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Financial assets: Cash and cash equivalents $ 180,255 180,255 180,255 — — Available for sale debt securities: U.S. Treasury obligations $ 253,878 253,878 253,878 — — Agency guaranteed obligations 27,498 27,498 — 27,498 — Mortgage-backed securities 1,285,609 1,285,609 — 1,285,609 — Asset-backed securities 32,235 32,235 — 32,235 — State and municipal obligations 56,584 56,584 — 56,584 — Corporate obligations 34,308 34,308 — 34,308 — Total available for sale debt securities $ 1,690,112 1,690,112 253,878 1,436,234 — Held to maturity debt securities, net of allowance for credit losses: U.S. Treasury obligations $ 5,146 5,147 5,147 — — Agency-sponsored obligations 11,058 10,406 10,406 — — State and municipal obligations 339,789 330,360 — 330,360 — Corporate obligations 7,087 6,688 — 6,688 — Total held to maturity debt securities, net of allowance for credit losses $ 363,080 352,601 15,553 337,048 — FHLBNY stock 79,217 79,217 79,217 — — Equity Securities 1,270 1,270 1,270 — — Loans, net of allowance for credit losses 10,766,501 10,437,204 — — 10,437,204 Derivative assets 101,754 101,754 — 101,754 — Financial liabilities: Deposits other than certificates of deposits $ 9,196,572 9,196,572 9,196,572 — — Certificates of deposit 1,095,942 1,093,125 — 1,093,125 — Total deposits $ 10,292,514 10,289,697 9,196,572 1,093,125 — Borrowings 1,970,033 1,960,174 — 1,960,174 — Subordinated Debentures 10,695 9,198 — 9,198 — Derivative liabilities 88,835 88,835 — 88,835 — 127 Fair Value Measurements as of December 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 $ 186,508 186,508 186,508 — — Available for sale debt securities: U.S. Treasury obligations 245,816 245,816 245,816 — — Mortgage-backed securities 1,427,139 1,427,139 — 1,427,139 — Asset-backed securities 37,621 37,621 — 37,621 — State and municipal obligations 56,864 56,864 — 56,864 — Corporate obligations 36,108 36,108 — 36,108 — Total available for sale debt securities $ 1,803,548 1,803,548 245,816 1,557,732 — Held to maturity debt securities: Agency-sponsored obligations $ 9,997 8,964 8,964 — — State and municipal obligations 366,146 353,417 — 353,417 — Corporate obligations 11,780 11,087 — 11,087 — Total held to maturity debt securities, net of allowance for credit losses $ 387,923 373,468 8,964 364,504 — FHLBNY stock 68,554 68,554 68,554 — — Equity Securities 1,147 1,147 1,147 — — Loans, net of allowance for credit losses 10,160,860 9,768,460 — — 9,768,460 Derivative assets 148,151 148,151 — 148,151 — Financial liabilities: Deposits other than certificates of deposits $ 9,811,588 9,811,588 9,811,588 — — Certificates of deposit 751,436 745,155 — 745,155 — Total deposits $ 10,563,024 10,556,743 9,811,588 745,155 — Borrowings 1,337,370 1,324,578 — 1,324,578 — Subordinated Debentures 10,493 9,422 — 9,422 — Derivative liabilities 120,896 120,896 — 120,896 — 128 (20) Earnings Per Share The following is a reconciliation of the outstanding shares used in the basic and diluted earnings per share calculations. For the Year Ended December 31, 2023 2022 2021 (In thousands, except per share data) Net income $ 128,398 175,648 167,921 Basic weighted average common shares outstanding 74,844,489 74,700,623 76,471,933 Plus: Dilutive shares 28,767 81,747 88,907 Diluted weighted average common shares outstanding 74,873,256 74,782,370 76,560,840 Earnings per share: Basic $ 1.72 2.35 2.20 Diluted $ 1.71 2.35 2.19 Anti-dilutive stock options and awards totaling 1,222,890 shares, 884,333 shares and 769,458 shares as of December 31, 2023, 2022 and 2021, respectively, were excluded from the earnings per share calculations. (21) Parent-only Financial Information The condensed financial statements of Provident Financial Services, Inc. (parent company only) are presented below: Condensed Statements of Financial Condition (Dollars in Thousands) December 31, 2023 December 31, 2022 Assets Cash and due from banks $ 7,948 10,854 Available for sale debt securities, at fair value 1,084 960 Investment in subsidiary 1,652,767 1,544,518 Due from subsidiary—SAP 28,677 34,439 ESOP loan 6,411 13,228 Other assets 4,571 4,410 Total assets $ 1,701,458 1,608,409 Liabilities and Stockholders’ Equity Other liabilities 167 213 Subordinated Debentures 10,695 10,493 Total stockholders’ equity 1,690,596 1,597,703 Total liabilities and stockholders’ equity $ 1,701,458 1,608,409 129 Condensed Statements of Operations (Dollars in Thousands) For the Years Ended December 31, 2023 2022 2021 Dividends from subsidiary $ 61,213 109,013 102,014 Interest income 529 785 1,022 Investment gain 169 178 167 Total income 61,911 109,976 103,203 Subordinated debentures 1,051 615 1,189 Non-interest expense 2,200 1,451 1,292 Total expense 3,251 2,066 2,481 Income before income tax expense 58,660 107,910 100,722 Income tax expense 247 — — Income before undistributed net income of subsidiary 58,413 107,910 100,722 Earnings in excess of dividends (equity in undistributed net income) of subsidiary 69,985 67,738 67,199 Net income $ 128,398 175,648 167,921 130 Condensed Statements of Cash Flows (Dollars in Thousands) For the Years Ended December 31, 2023 2022 2021 Cash flows from operating activities: Net income $ 128,398 175,648 167,921 Adjustments to reconcile net income to net cash provided by operating activities Earnings in excess of dividends (equity in undistributed net income) of subsidiary ( 69,985 ) ( 67,738 ) ( 67,199 ) ESOP allocation 3,086 4,140 4,318 SAP allocation 7,569 9,407 5,451 Stock option allocation 144 198 200 Decrease (increase) in due from subsidiary—SAP 5,762 3,847 ( 4,061 ) Increase in other assets ( 11,317 ) ( 13,817 ) ( 3,430 ) Decrease in other liabilities ( 45 ) ( 142 ) ( 12 ) Net cash provided by (used in) operating activities 63,612 111,543 103,188 Cash flows from investing activities: Cash received, net of cash consideration paid for acquisition — — — Net decrease in ESOP loan 6,817 6,387 5,939 Net cash provided by investing activities 6,817 6,387 5,939 Cash flows from financing activities: Purchases of treasury stock — ( 46,530 ) ( 20,711 ) Purchase of employee restricted shares to fund statutory tax withholding ( 1,678 ) ( 1,021 ) ( 961 ) Cash dividends paid ( 72,447 ) ( 72,023 ) ( 71,478 ) Repayment of subordinated debentures — — ( 15,000 ) Shares issued dividend reinvestment plan — — — Stock options exercised 790 — 887 Net cash used in financing activities ( 73,335 ) ( 119,574 ) ( 107,263 ) Net increase (decrease) in cash and cash equivalents ( 2,906 ) ( 1,644 ) 1,864 Cash and cash equivalents at beginning of period 10,854 12,498 10,634 Cash and cash equivalents at end of period $ 7,948 10,854 12,498 131 (22) Other Comprehensive Income (Loss) The following table presents the components of other comprehensive (loss) income both gross and net of tax, for the years ended December 31, 2023, 2022 and 2021 (in thousands): For the Years Ended December 31, 2023 2022 2021 Before Tax Tax Effect After Tax Before Tax Tax Effect After Tax Before Tax Tax Effect After Tax Components of Other Comprehensive Income ( Loss): Unrealized losses on available for sale debt securities: Net (losses) gains arising during the period $ 43,250 ( 11,125 ) 32,125 ( 254,591 ) 68,230 ( 186,361 ) ( 31,972 ) 8,242 ( 23,730 ) Reclassification adjustment for gains included in net income — — — ( 58 ) 16 ( 42 ) ( 230 ) 59 ( 171 ) Total 43,250 ( 11,125 ) 32,125 ( 254,649 ) 68,246 ( 186,403 ) ( 32,202 ) 8,301 ( 23,901 ) Unrealized gains (losses) on derivatives designated as cash flow hedges: Net (losses) gains arising during the period 3,288 ( 900 ) 2,388 26,231 ( 7,030 ) 19,201 8,311 ( 2,142 ) 6,169 Reclassification adjustment for gains included in net income ( 17,713 ) 4,765 ( 12,948 ) ( 4,504 ) 1,207 ( 3,297 ) 3,878 ( 1,000 ) 2,878 Total ( 14,425 ) 3,865 ( 10,560 ) 21,727 ( 5,823 ) 15,904 12,189 ( 3,142 ) 9,047 Amortization related to post-retirement obligations 3,249 ( 884 ) 2,365 ( 1,926 ) 517 ( 1,409 ) 5,474 ( 1,412 ) 4,062 Total other comprehensive (loss) income $ 32,074 ( 8,144 ) 23,930 ( 234,848 ) 62,940 ( 171,908 ) ( 14,539 ) 3,747 ( 10,792 ) The following table presents the changes in the components of accumulated other comprehensive (loss) income, net of tax, for the years ended December 31, 2023 and 2022 (in thousands): Changes in Accumulated Other Comprehensive Income by Component, net of tax For the Years Ended December 31, 2023 2022 Unrealized Losses on Available for Sale Debt Securities Post-Retirement Obligations Unrealized Gains on Derivatives (cash flow hedges) Accumulated Other Comprehensive Income (Loss) Unrealized Gains (Losses) on Available for Sale Debt Securities Post-Retirement Obligations Unrealized Gains (Losses) on Derivatives (cash flow hedges) Accumulated Other Comprehensive Income (Loss) Balance at the beginning of the period $ ( 186,614 ) 1,572 19,997 ( 165,045 ) ( 211 ) 2,981 4,093 6,863 Current period change in other comprehensive (loss) income 32,125 2,365 ( 10,560 ) 23,930 ( 186,403 ) ( 1,409 ) 15,904 ( 171,908 ) Balance at the end of the period $ ( 154,489 ) 3,937 9,437 ( 141,115 ) ( 186,614 ) 1,572 19,997 ( 165,045 ) 132 The following table summarizes the reclassifications out of accumulated other comprehensive (loss) income for the years ended December 31, 2023, 2022 and 2021 (in thousands): Reclassifications Out of Accumulated Other Comprehensive Income (Loss) Amount reclassified from AOCI for the years ended December 31, Affected line item in the Consolidated Statement of Income 2023 2022 2021 Details of AOCI: Available for sale debt securities: Realized net gains on the sale of securities available for sale $ — ( 58 ) ( 230 ) Net gain on securities transactions — 16 59 Income tax expense — ( 42 ) ( 171 ) Net of tax Cash flow hedges: Unrealized gains (losses) on derivatives designated as cash flow hedges ( 17,713 ) ( 4,504 ) 3,878 Interest expense 4,765 1,207 ( 1,000 ) Income tax expense ( 12,948 ) ( 3,297 ) 2,878 Post-retirement obligations: Amortization of actuarial (gains) losses ( 1,421 ) ( 1304 ) ( 598 ) Compensation and employee benefits (1) 384 349 154 Income tax expense ( 1,037 ) ( 955 ) ( 444 ) Net of tax Total reclassifications $ ( 13,985 ) ( 4,293 ) 2,263 Net of tax (1) This item is included in the computation of net periodic benefit cost. See Note 13. Benefit Plans 133 (23) 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. As of December 31, 2023 and 2022, the Company had 154 and 152 interest rate swaps with an aggregate notional amount of $ 2.30 billion and $ 2.40 billion, respectively. The Company periodically enters into risk participation agreements ("RPAs"), with the Company functioning as either the lead institution, or as a participant when another company is the lead institution on a commercial loan. These RPAs are entered into to manage the credit exposure on interest rate contracts associated with these loan participation agreements. Under the RPAs, the Company will either receive or make a payment in the event the borrower defaults on the related interest rate contract. The Company has minimum collateral posting thresholds with certain of its risk participation counterparties, and has posted collateral of $ 70,000 against the potential risk of default by the borrower under these agreements. As of December 31, 2023 and 2022, the Company had 12 and 14 credit derivatives, respectively, with aggregate notional amounts of $ 142.8 million and $ 157.9 million, respectively, from participations in interest rate swaps as part of these loan participation arrangements. As of December 31, 2023, the asset and liability positions of these fair value credit derivatives totaled $ 17,000 and $ 8,000 , respectively, compared to $ 26,000 and $ 12,000 , respectively, as of December 31, 2022 . Cash Flow Hedges of Interest Rate Risk. The Company’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable payment amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Changes in the fair value of derivatives designated and that qualify as cash flow hedges of interest rate risk are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the years ended December 31, 2023, 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 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 $ 11.6 million will be reclassified as a reduction to interest expense. As of December 31, 2023, the Company had 9 outstanding interest rate derivatives with an aggregate notional amount of $ 455.0 million that was designated as a cash flow hedge of interest rate risk. Assets and liabilities relating to certain financial instruments, including derivatives, may be eligible for offset in the Consolidated Statements of Financial Condition and/or subject to enforceable master netting arrangements or similar agreements. The Company does not offset asset and liabilities under such arrangements in the Consolidated Statements of Financial Condition. The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are eligible for offset in the Consolidated Statements of Condition as of December 31, 2023 and December 31, 2022 (in thousands). 134 Fair Values of Derivative Instruments as of December 31, 2023 Asset Derivatives Liability Derivatives Notional Amount Consolidated Statements of Financial Condition Fair value (2) Notional Amount Consolidated Statements of Financial Condition Fair value (2) Derivatives not designated as a hedging instrument: Interest rate products $ 1,152,200 Other assets $ 89,261 $ 1,152,200 Other liabilities $ 89,461 Credit contracts 46,359 Other assets 17 96,462 Other liabilities 8 Total derivatives not designated as a hedging instrument 89,278 89,469 Derivatives designated as a hedging instrument: Interest rate products 330,000 Other assets 15,886 125,000 Other liabilities 1,365 Total gross derivative amounts recognized on the balance sheet 105,164 90,834 Gross amounts offset on the balance sheet — — Net derivative amounts presented on the balance sheet $ 105,164 $ 90,834 Gross amounts not offset on the balance sheet: Financial instruments - institutional counterparties $ — $ — Cash collateral - institutional counterparties (1) 101,328 — Net derivatives not offset $ 3,836 $ 90,834 135 Fair Values of Derivative Instruments as of December 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 $ 1,198,191 Other assets $ 122,047 $ 1,198,191 Other liabilities $ 122,378 Credit contracts 47,143 Other assets 26 110,714 Other liabilities 12 Total derivatives not designated as a hedging instrument 122,073 122,390 Derivatives designated as a hedging instrument: Interest rate products 460,000 Other assets 29,119 — Other liabilities — Total gross derivative amounts recognized on the balance sheet 151,192 122,390 Gross amounts offset on the balance sheet — — Net derivative amounts presented on the balance sheet 151,192 $ 122,390 Gross amounts not offset on the balance sheet: Financial instruments - institutional counterparties $ — — Cash collateral - institutional counterparties (1) 149,800 — Net derivatives not offset $ 1,392 $ 122,390 (1) Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The application of the cash collateral cannot reduce the net derivative position below zero. Therefore, excess cash collateral, if any, is not reflected above. (2) The fair values related to interest rate products in the above net derivative tables show the total value of assets and liabilities, which include accrued interest receivable and accrued interest payable for the periods ended December 31, 2023 and December 31, 2022. 136 The table below presents the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income for the years ended December 31, 2023, 2022 and 2021 (in thousands). Gain recognized in Income on derivatives For the Year Ended December 31, Consolidated Statements of Income 2023 2022 2021 Derivatives not designated as hedging instruments: Interest rate products Other income $ 133 722 384 Credit contracts Other income ( 7 ) ( 49 ) 29 Total derivatives not designated as hedging instruments $ 126 673 413 Derivatives designated as hedging instruments: (Gain) Loss recognized in Expense on derivatives Interest rate products Interest (income) expense $ ( 17,713 ) ( 4,504 ) 3,878 Total derivatives designated as a hedging instruments $ ( 17,713 ) ( 4,504 ) 3,878 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. As of December 31, 2023, the Company had four dealer counterparties. The Company had a net asset position with respect to all of its counterparties. (24) 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 years ended December 31, 2023, 2022 and 2021 the out-of-scope revenue related to financial instruments were 89 %, 84 % and 82 % of the Company's total revenue, respectively. Revenue-generating activities that are within the scope of Topic 606, are components of non-interest income. These revenue streams can generally be classified into 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 years ended December 31, 2023, 2022 and 2021: 137 December 31, (in-thousands) 2023 2022 2021 Non-interest income In-scope of Topic 606: Wealth management fees $ 27,669 27,870 30,756 Insurance agency income 13,934 11,440 10,216 Banking service charges and other fees: Service charges on deposit accounts 12,959 12,553 10,921 Debit card and ATM fees 2,963 3,124 5,665 Total banking service charges and other fees 15,922 15,677 16,586 Total in-scope non-interest income 57,525 54,987 57,558 Total out-of-scope non-interest income 22,304 32,802 29,251 Total non-interest income $ 79,829 87,789 86,809 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 is 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 is generally satisfied, and revenue recognized, at the time the transaction is completed, or the service rendered. Fees for these services are generally received from the customer either at the time of transaction, or monthly. Debit card and ATM fees are generally transaction-based. Debit card revenue is primarily comprised of interchange fees earned when a customer's Company card is processed through a card payment network. ATM fees are largely generated when a Company cardholder uses a non-Company ATM, or a non-Company cardholder uses a Company ATM. The Company's performance obligation for these services is satisfied when the service is rendered. Payment is generally received at 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 . 138 (25) Leases The following table represents the consolidated statements of financial condition classification of the Company’s right-of use-assets and lease liabilities as of December 31, 2023 and December 31, 2022 (in thousands): Classification December 31, 2023 December 31, 2022 Lease Right-of-Use Assets: Operating lease right-of-use assets Other assets $ 56,907 $ 60,577 Lease Liabilities: Operating lease liabilities Other liabilities $ 60,039 $ 63,372 The calculated amount of the right-of-use assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right-of-use asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception based upon the term of the lease. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was applied. All of the leases in which the Company is the lessee are classified as operating leases and are primarily comprised of real estate property for branches and administrative offices with terms extending through 2040. As of December 31, 2023, the weighted-average remaining lease term and the weighted-average discount rate for the Company's operating leases were 7.9 years and 2.71 %, respectively. The following table represents 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): Year ended December 31, 2023 Year ended December 31, 2022 Lease Costs Operating lease cost $ 10,495 10,617 Variable lease cost 3,193 2,722 Total Lease Cost $ 13,688 13,339 Cash paid for amounts included in the measurement of lease liabilities (in thousands): Year ended December 31, 2023 Year ended December 31, 2022 Operating cash flows from operating leases $ 9,904 8,665 139 Future minimum payments for operating leases with initial or remaining terms of one year or more as of December 31, 2023 were as follows (in thousands): Operating Leases Years ended: 2022 $ 10,020 2023 9,540 2024 8,647 2025 7,813 2026 6,926 Thereafter 23,850 Total future minimum lease payments 66,796 Amounts representing interest 6,757 Present value of net future minimum lease payments $ 60,039 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None.