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Item 1. Financial Statements

2024-04-26 compared with 2023-11-08 · 257 added, 439 removed, 916 unchanged (43% of the section changed)

3 unchanged sentences

Consolidated Statements of Financial Condition

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

March 31, 2024 (Unaudited) and December 31, 2023

(Dollars in Thousands)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and due from banks $ 158,306 $ 180,241

2 unchanged sentences

Available for sale debt securities, at fair value 1,666,306 1,690,112

Held to maturity debt securities, net (fair value of $ 343,082 at September 30, 2023 (unaudited) and $ 373,468 at December 31, 2022)

Held to maturity debt securities, net (fair value of $ 341,459 as of March 31, 2024 and $ 352,601 as of December 31, 2023)

354,671 363,080

24 unchanged sentences

Preferred stock, $ 0.01 par value, 50,000,000 shares authorized, none issued

Common stock, $ 0.01 par value, 200,000,000 shares authorized, 83,209,012 shares issued and 75,531,884 shares outstanding at September 30, 2023 and 76,169,196 outstanding at December 31, 2022

Common stock, $ 0.01 par value, 200,000,000 shares authorized, 83,209,012 shares issued and 75,928,193 shares outstanding as of March 31, 2024 and 75,537,186 outstanding as of December 31, 2023

Additional paid-in capital 990,582 989,058

Retained earnings 988,480 974,542

Accumulated other comprehensive (loss) income ( 195,056 ) ( 165,045 )

Accumulated other comprehensive loss ( 151,585 ) ( 141,115 )

Treasury stock ( 129,062 ) ( 127,825 )

8 unchanged sentences

Consolidated Statements of Income

Three and nine months ended September 30, 2023 and 2022 (Unaudited)

Three months ended March 31, 2024 and 2023 (Unaudited)

(Dollars in Thousands, except per share data)

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

Interest income:

Three months ended March 31,

Interest and dividend income:

Real estate secured loans $ 107,456 $ 95,988

4 unchanged sentences

Deposits, Federal funds sold and other short-term investments 1,182 845

Total interest income 158,197 121,731 451,649 329,006

Total interest and dividend income 163,859 143,556

Interest expense:

11 unchanged sentences

Bank-owned life insurance 1,817 1,484

Net gains on securities transactions 13 ( 3 ) 37 154

Net loss on securities transactions ( 1 ) ( 5 )

Other income 798 3,269

22 unchanged sentences

Consolidated Statements of Comprehensive Income

Three and nine months ended September 30, 2023 and 2022 (Unaudited)

Three months ended March 31, 2024 and 2023 (Unaudited)

(Dollars in Thousands)

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

Three months ended March 31,

Net income $ 32,082 $ 40,536

Other comprehensive (loss) income, net of tax:

Other comprehensive income (loss), net of tax:

Unrealized gains and losses on available for sale debt securities:

Net unrealized (losses) arising during the period ( 31,224 ) ( 67,293 ) ( 25,086 ) ( 197,997 )

Net unrealized (losses) gains arising during the period ( 9,957 ) 20,864

Reclassification adjustment for gains included in net income — —

1 unchanged sentence

Unrealized gains and losses on derivatives:

Net unrealized gains arising during the period 2,352 5,998 5,385 18,225

Net unrealized gains (losses) arising during the period 3,385 ( 616 )

Reclassification adjustment for gains included in net income ( 3,069 ) ( 3,080 )

1 unchanged sentence

Amortization related to post-retirement obligations ( 829 ) ( 269 )

Total other comprehensive (loss) ( 32,563 ) ( 62,688 ) ( 30,011 ) ( 181,350 )

Total comprehensive (loss) income $ ( 4,016 ) $ ( 19,267 ) $ 71,075 $ ( 54,737 )

Total other comprehensive (loss) income ( 10,470 ) 16,899

Total comprehensive income $ 21,612 $ 57,435

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

For the three and nine months ended September 30, 2022 (Unaudited)

Three months ended March 31, 2023 (Unaudited)

(Dollars in Thousands)

For the three months ended September 30, 2022

For the three months ended March 31, 2023

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

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

Net income — — 43,421 — — — — — 43,421

Other comprehensive loss, net of tax — — — ( 62,688 ) — — — — ( 62,688 )

Cash dividends paid — — ( 18,066 ) — — — — — ( 18,066 )

Distributions from deferred comp plans — 47 — — — — 168 ( 168 ) 47

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

Purchase of employee restricted shares to fund statutory tax withholding — — — — ( 54 ) — — — ( 54 )

Allocation of ESOP shares — 296 — — — 811 — — 1,107

Allocation of Stock Award Plan ("SAP") shares — 1,904 — — — — — — 1,904

Allocation of stock options — 49 — — — — — — 49

Balance at September 30, 2022 $ 832 $ 978,363 $ 886,332 $ ( 174,487 ) $ ( 127,145 ) $ ( 12,910 ) $ ( 3,537 ) $ 3,537 $ 1,550,985

For the nine months ended September 30, 2022

COMMONSTOCK ADDITIONAL

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

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

STOCKHOLDERS’ EQUITY

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

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 — — 40,536 — — — — — 40,536

Other comprehensive loss, net of tax — — — ( 181,350 ) — — — — ( 181,350 )

Other comprehensive income net of tax — — — 16,899 — — — — 16,899

Cash dividends paid — — ( 18,594 ) — — — — — ( 18,594 )

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

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

Distributions from deferred comp plans — 47 — — — — 138 ( 138 ) 47

Purchases of treasury stock — — — — ( 46,529 ) — — — ( 46,529 )

Purchase of employee restricted shares to fund statutory tax withholding — — — — ( 1,667 ) — — — ( 1,667 )

1 unchanged sentence

Allocation of ESOP shares — 244 — — — 812 — — 1,056

Allocation of SAP shares — 7,389 — — — — — — 7,389

Allocation of Stock Award Plan ("SAP") shares — 2,833 — — — — — — 2,833

Treasury shares issued due to acquisition — — — — — — — — —

Allocation of stock options — 44 — — — — — — 44

Balance at September 30, 2022 $ 832 $ 978,363 $ 886,332 $ ( 174,487 ) $ ( 127,145 ) $ ( 12,910 ) $ ( 3,537 ) $ 3,537 $ 1,550,985

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

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

For the three and nine months ended September 30, 2023 (Unaudited)

Three months ended March 31, 2024 (Unaudited)

(Dollars in Thousands)

For the three months ended September 30, 2023

For the three months ended March 31, 2024

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

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

Net income — — 28,547 — — — — — 28,547

Other comprehensive loss, net of tax — — — ( 32,563 ) — — — — ( 32,563 )

Cash dividends paid — — ( 18,148 ) — — — — — ( 18,148 )

Distributions from deferred comp plans — 36 — — — — 137 ( 137 ) 36

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

Purchase of employee restricted shares to fund statutory tax withholding — — — — — — — — —

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

Allocation of ESOP shares — ( 24 ) — — — 812 — — 788

Allocation of SAP shares — 1,805 — — — — — — 1,805

Allocation of stock options — 34 — — — — — — 34

Balance at September 30, 2023 $ 832 $ 988,001 $ 964,802 $ ( 195,056 ) $ ( 127,818 ) $ ( 7,791 ) $ ( 3,013 ) $ 3,013 $ 1,622,970

For the nine months ended September 30, 2023

COMMONSTOCK ADDITIONAL

CAPITAL RETAINED EARNINGS ACCUMULATED

COMPREHENSIVE

LOSS TREASURY

STOCK UNALLOCATED

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

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

Balance as of December 31, 2023 832 989,058 974,542 ( 141,115 ) ( 127,825 ) ( 4,896 ) ( 2,694 ) 2,694 1,690,596

Net income — — 32,082 — — — — — 32,082

1 unchanged sentence

Cash dividends paid — — ( 18,144 ) — — — — — ( 18,144 )

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

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

Distributions from deferred comp plans — 33 — — — — 148 ( 148 ) 33

4 unchanged sentences

Allocation of stock options — 28 — — — — — — 28

Balance at September 30, 2023 $ 832 $ 988,001 $ 964,802 $ ( 195,056 ) $ ( 127,818 ) $ ( 7,791 ) $ ( 3,013 ) $ 3,013 $ 1,622,970

Balance as of March 31, 2024 $ 832 $ 990,582 $ 988,480 $ ( 151,585 ) $ ( 129,062 ) $ ( 4,085 ) $ ( 2,546 ) $ 2,546 $ 1,695,162

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Nine months ended September 30, 2023 and 2022 (Unaudited)

Three months ended March 31, 2024 and 2023 (Unaudited)

(Dollars in Thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Provision charge for credit losses on loans and securities 186 6,001

Provision charge (benefit) for credit losses on off-balance sheet credit exposures 1,624 ( 1,788 )

Deferred tax benefit ( 2,332 ) ( 222 )

Provision (benefit) charge for credit losses on off-balance sheet credit exposures ( 506 ) 739

Deferred tax expense 4,419 357

Amortization of operating lease right-of-use assets 2,627 2,628

9 unchanged sentences

Net gain on sale of loans ( 45 ) ( 778 )

Net gain on securities transactions ( 37 ) ( 154 )

Net loss on securities transactions 1 5

Net gain on sale of premises and equipment — ( 62 )

Net gain on sale of foreclosed assets ( 42 ) ( 2,280 )

Increase in accrued interest receivable ( 3,838 ) ( 3,130 )

Increase in other assets ( 23,596 ) ( 60,364 )

Increase in other liabilities 9,101 74,992

Decrease (increase) in accrued interest receivable 289 ( 137 )

(Increase) decrease in other assets ( 13,379 ) 40,019

Increase (decrease) in other liabilities 14,007 ( 36,189 )

Net cash provided by operating activities 41,409 58,066

Cash flows from investing activities:

Net increase in loans ( 420,331 ) ( 449,803 )

Net decrease in loans 34,378 14,278

Purchases of loans — ( 1,026 )

9 unchanged sentences

Purchases of premises and equipment ( 536 ) ( 613 )

Net cash used in investing activities ( 337,430 ) ( 476,713 )

Net cash provided by investing activities 54,583 19,514

Cash flows from financing activities:

2 unchanged sentences

Cash dividends paid to stockholders ( 18,144 ) ( 18,594 )

Nine months ended September 30,

Purchase of treasury stock — ( 46,529 )

Three months ended March 31,

Purchase of employee restricted shares to fund statutory tax withholding ( 1,237 ) ( 1,667 )

3 unchanged sentences

Net increase (decrease) in short-term borrowings 88,065 ( 221,497 )

Net cash provided by (used in) financing activities 213,112 ( 208,752 )

Net increase (decrease) in cash and cash equivalents 2,761 ( 527,595 )

Net cash used in financing activities ( 117,895 ) ( 30,235 )

Net (decrease) increase in cash and cash equivalents ( 21,903 ) 47,345

Cash and cash equivalents at beginning of period 180,185 186,438

7 unchanged sentences

Income taxes $ 1,317 $ 960

Non-cash investing activities:

Transfer of loans receivable to foreclosed assets $ — $ 12,285

11 unchanged sentences

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

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

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations that may be expected for all of 2024.

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

3 unchanged sentences

Earnings Per Share

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

Three months ended September 30,

Income Weighted

Outstanding Per

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three months ended March 31, 2024 and 2023 (dollars in thousands, except per share amounts):

Three months ended March 31,

Income Weighted

Outstanding Per

Net income $ 28,547 $ 43,421

Basic earnings per share:

Income available to common stockholders $ 28,547 74,909,083 $ 0.38 $ 43,421 74,297,237 $ 0.58

Dilutive shares 5,122 96,143

Diluted earnings per share:

Income available to common stockholders $ 28,547 74,914,205 $ 0.38 $ 43,421 74,393,380 $ 0.58

Nine months ended September 30,

Income Weighted

Outstanding Per

Income Weighted

Common Shares Outstanding Per

Net income $ 32,082 $ 40,536

4 unchanged sentences

Income available to common stockholders $ 32,082 75,275,660 $ 0.43 $ 40,536 74,702,527 $ 0.54

Anti-dilutive stock options and awards at September 30, 2023 and 2022, totaling 1.2 million shares and 921,834 shares, respectively, were excluded from the earnings per share calculations.

Anti-dilutive stock options and awards as of March 31, 2024 and 2023, totaling 1.4 million shares and 984,877 shares, respectively, were excluded from the earnings per share calculations.

Loans Receivable and Allowance for Credit Losses

1 unchanged sentence

Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility to the Company’s reported earnings.

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

For the three months ended March 31, 2024, an increase in specific reserves on impaired credits, partially offset by an improved

economic forecast for the current quarter within our CECL model, led to a provisions charge for credit losses, while a decrease in loans approved and awaiting closing led to a provision benefit for credit losses on off-balance sheet credit exposures.

See Notes 4 and 10 to the Consolidated Financial Statements for more information on the allowance for credit losses on loans and off-balance sheet credit exposures.

5 unchanged sentences

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

At September 30, 2023, the Company performed an analysis and concluded that no triggering events were identified and therefore a test for impairment between annual tests was not required.

As of March 31, 2024, the Company performed a qualitative analysis of goodwill and concluded that no triggering events were identified and therefore a test for impairment between annual tests was not required.

Business Combinations

1 unchanged sentence

- Merger Agreement

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

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

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

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

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

Upon completion of the transaction, which remains subject to regulatory approvals and other closing conditions, Provident shareholders will own approximately 58 % and Lakeland shareholders will own approximately 42 % of the combined company.

The combined company is expected to have more than $ 25 billion in total assets, $ 18 billion in total loans and $ 20 billion in total deposits.

The Company received all regulatory approvals for its previously announced acquisition of Lakeland Bancorp, Inc.

("Lakeland"), subject to certain conditions and commitments (referred to as the “Regulatory Conditions”).

The Regulatory Conditions include, but are not limited to:

prior to consummation of the merger, the Company must complete the issuance of $ 200.0 million of Tier 2 qualifying subordinated debt;

for three years following consummation of the merger, Provident Bank must maintain regulatory capital ratios at or above 8.50 % for Tier 1 Leverage Capital and 11.25 % for Total Risk Based Capital;

and Provident Bank must maintain its commercial real estate concentrations (as a percent of capital and reserves) at levels at or below those forecasted in the pro forma financial projections that Provident Bank submitted to the FDIC.

In connection with the acquisition, Lakeland Bank, a wholly owned subsidiary of Lakeland, will be merged with and into Provident Bank, a wholly owned subsidiary of the Company.

As of March 31, 2024, Lakeland had, on a consolidated basis, $ 11.00 billion in total assets, which included $ 8.30 billion in total loans and $ 8.50 billion in total deposits, and operated 67 full-service banking offices in New Jersey.

Under the merger agreement, each share of Lakeland common stock will be exchanged for 0.8319 shares, or approximately 55 million shares, of the Company's common stock plus cash in lieu of fractional shares.

Provident stockholders will own approximately 58 % and Lakeland shareholders will own approximately 42 % of the combined company.

Merger-related expenses, which is a separate line in non-interest expense on the Consolidated Statements of Income, totaled $ 2.2 million for the three months ended March 31, 2024 compared with $ 1.1 million for the three months ended March 31, 2023.

Investment Securities

At September 30, 2023, the Company had $ 1.66 billion and $ 370.4 million in available for sale debt securities and held to maturity debt securities, respectively.

As of March 31, 2024, the Company had $ 1.67 billion and $ 354.7 million in available for sale debt securities and held to maturity debt securities, respectively.

Many factors, including lack of liquidity in the secondary market for certain securities, variations in pricing information, changes in interest rates, regulatory actions, changes in the business environment or any changes in the competitive marketplace, could have an adverse effect on the Company’s investment portfolio.

The total number of available for sale and held to maturity debt securities in an unrealized loss position at September 30, 2023 totaled 1,065 , compared with 914 at December 31, 2022.

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

The total number of available for sale and held to maturity debt securities in an unrealized loss position as of March 31, 2024 totaled 954 , compared with 808 as of December 31, 2023.

The increase in the number of securities in an unrealized loss position as of March 31, 2024 was due to higher current market interest rates compared to rates as of December 31, 2023.

Available for Sale Debt Securities

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

September 30, 2023

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 March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024

Treasury obligations $ 276,863 — ( 24,476 ) 252,387

Agency obligations 28,208 62 ( 22 ) 28,248

Agency-guaranteed obligations 22,392 1,126 — 23,518

Mortgage-backed securities 1,446,173 119 ( 186,411 ) 1,259,881

5 unchanged sentences

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

3 unchanged sentences

$ 1,901,798 2,159 ( 213,845 ) 1,690,112

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

Accrued interest on available for sale debt securities, which is excluded from the amortized cost, totaled $ 5.2 million and $ 4.9 million as of March 31, 2024 and December 31, 2023, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.

The amortized cost and fair value of available for sale debt securities as of March 31, 2024, by contractual maturity, are shown below (in thousands).

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

September 30, 2023

March 31, 2024

Due in one year or less $ — —

4 unchanged sentences

Investments which pay principal on a periodic basis totaling $ 1.50 billion at amortized cost and $ 1.31 billion at fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

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

For the three and nine months ended September 30, 2023, there were no proceeds from calls on

securities in the available for sale debt securities portfolio.

For the three and nine months ended September 30, 2022, proceeds from calls on securities in the available for sale debt securities portfolio totaled $ 5.4 million with gains of $ 84,000 and $ 26,000 of losses recognized, respectively.

The number of available for sale debt securities in an unrealized loss position at September 30, 2023 totaled 474 , compared with 475 at December 31, 2022.

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

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

For the three months ended March 31, 2024 and March 31, 2023, no securities were sold or called from the available for sale debt securities portfolio.

The number of available for sale debt securities in an unrealized loss position as of March 31, 2024 totaled 434 , compared with 436 as of December 31, 2023.

All securities in an unrealized loss position were investment grade as of March 31, 2024.

Held to Maturity Debt Securities

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

September 30, 2023

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the estimated fair value for held to maturity debt securities as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024

Treasury Obligations $ 5,767 — — 5,767

Agency obligations 12,098 — ( 897 ) 11,201

Agency-sponsored obligations 11,058 — ( 633 ) 10,425

State and municipal obligations 331,292 93 ( 12,315 ) 319,070

2 unchanged sentences

December 31, 2023

Agency obligations $ 9,997 — ( 1,033 ) 8,964

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

1 unchanged sentence

$ 363,111 245 ( 10,755 ) 352,601

The allowance for credit losses on held to maturity debt securities as of March 31, 2024 and December 31, 2023 was $ 17,000 and $ 31,000 , respectively, and are excluded from amortized cost in the tables above.

Accrued interest on held to maturity debt securities, which is excluded from the amortized cost, totaled $ 2.4 million and $ 3.1 million as of March 31, 2024 and December 31, 2023, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.

The Company generally purchases securities for long-term investment purposes, and differences between amortized cost and fair value may fluctuate during the investment period.

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

For the three and nine months ended September 30, 2023, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $ 3.2 million and $ 9.8 million, respectively.

As to these calls on securities, for the three months ended September 30, 2023, there were gross gains of $ 16,000 and gross losses of $ 3,000 , while for the nine months ended September 30, 2023, gross gains totaled $ 45,000 , with gross losses of $ 8,000 .

For the three and nine months ended September 30, 2022, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $ 10.3 million and $ 36.4 million, respectively.

As to these calls on securities, for the three months ended September 30, 2022, gross gains totaled $ 26,000 , with gross losses of $ 29,000 , while for the nine months ended September 30, 2022, gross gains totaled $ 129,000 , with $ 33,000 of gross losses.

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

There were no sales of securities from the held to maturity debt securities portfolio for the three months ended March 31, 2024 and 2023.

For the three months ended March 31, 2024, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $ 1.2 million.

As to these calls on securities, for the three months ended March 31, 2024, there were no gross gains and gross losses of $ 1,200 .

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

The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio as of March 31, 2024 by contractual maturity are shown below (in thousands).

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

September 30, 2023

March 31, 2024

Due in one year or less $ 34,403 34,210

3 unchanged sentences

$ 354,688 341,459

The allowance for credit losses on held to maturity debt securities at September 30, 2023 and December 31, 2022 was $ 34,000 and $ 27,000 , respectively, and are excluded from amortized cost in the tables above.

The number of held to maturity debt securities in an unrealized loss position at September 30, 2023 totaled 591 , compared with 439 at December 31, 2022.

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

The number of held to maturity debt securities in an unrealized loss position as of March 31, 2024 totaled 520 , compared with 372 as of December 31, 2023.

The increase in the number of securities in an unrealized loss position as of March 31, 2024, was due to higher current market interest rates compared to rates as of December 31, 2023.

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;

• Agency-sponsored obligations;

• Mortgage-backed securities;

5 unchanged sentences

government, are highly rated by major rating agencies and have a long history of no credit losses.

The majority of the state and municipal and corporate obligations carry credit ratings from the rating agencies at September 30, 2023 no lower than A and the Company had no securities rated BBB or worse by Moody’s Investors Service.

The majority of the state and municipal and corporate obligations carry credit ratings from the rating agencies as of March 31, 2024, that were no lower than an A rating 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 at September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023

The following table provides the amortized cost of held to maturity debt securities by credit rating as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024

Total Portfolio AAA AA A BBB Not Rated Total

Treasury obligations $ 5,767 — — — — 5,767

Agency obligations 12,098 — — — — 12,098

Agency-sponsored obligations 11,058 — — — — 11,058

State and municipal obligations 45,728 252,805 30,211 — 2,548 331,292

3 unchanged sentences

Total Portfolio AAA AA A BBB Not Rated Total

Agency obligations $ 9,997 — — — — 9,997

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

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

At September 30, 2023, the held to maturity debt securities portfolio was comprised of 16 % 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.

As of March 31, 2024, the held to maturity debt securities portfolio was comprised of 18 % rated AAA, 72 % rated AA, 10 % rated A, and less than 1 % either below an A rating or not rated by Moody’s Investors Service or Standard and Poor’s.

Securities not explicitly rated, such as U.S.

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Loans Receivable and Allowance for Credit Losses

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

September 30, 2023 December 31, 2022

Loans receivable as of March 31, 2024 and December 31, 2023 are summarized as follows (in thousands):

March 31, 2024 December 31, 2023

Mortgage loans:

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Total loans $ 10,842,707 10,873,701

Accrued interest on loans totaled $ 51.0 million and $ 50.9 million as of March 31, 2024 and December 31, 2023, respectively, and is presented within total accrued interest receivable on the consolidated statements of financial condition.

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

September 30, 2023

March 31, 2024

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

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Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers.

The principal amounts of these non-accrual loans were $ 39.5 million and $ 58.5 million at September 30, 2023 and December 31, 2022, respectively.

Included in non-accrual loans were $ 6.4 million and $ 42.9 million of loans which were less than 90 days past due at September 30, 2023 and December 31, 2022, respectively.

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

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

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

The principal amounts of these non-accrual loans were $ 47.6 million and $ 49.6 million as of March 31, 2024 and December 31, 2023, respectively.

Included in non-accrual loans were $ 4.6 million and $ 23.2 million of

loans which were less than 90 days past due as of March 31, 2024 and December 31, 2023, respectively.

There were no loans 90 days or greater past due and still accruing interest as of March 31, 2024 and December 31, 2023.

The activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

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

Balance at beginning of period $ 73,407 31,475 2,318 107,200

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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 to operations 6,212 ( 308 ) 96 6,000

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

Nine months ended September 30, Mortgage loans Commercial loans Consumer loans Total

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

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

2022-02 ( 510 ) ( 43 ) ( 41 ) ( 594 )

Provision charge (benefit) to operations 17,573 9,898 ( 71 ) 27,400

Recoveries of loans previously charged-off 107 706 347 1,160

Loans charged-off ( 731 ) ( 7,445 ) ( 250 ) ( 8,426 )

Balance at end of period $ 74,657 30,529 2,377 107,563

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

Provision charge (benefit) charge to operations 8,589 ( 3,734 ) 145 5,000

Recoveries of loans previously charged-off 539 3,725 404 4,668

Loans charged-off ( 1,010 ) ( 555 ) ( 210 ) ( 1,775 )

Balance at end of period $ 60,222 25,779 2,632 88,633

For the three and nine months ended September 30, 2023, the Company recorded an $ 11.0 million and a $ 27.4 million provision for credit losses on loans, respectively.

The increase in provision was attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices used in our CECL model.

For the three months ended September 30, 2023, net charge-offs totaled $ 5.5 million, which was primarily attributable to one commercial loan.

For the nine months ended September 30, 2023, net charge-offs totaled $ 7.3 million, which was primarily attributable to two commercial loans.

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

2023 2022 2021 2020 2019 Prior to 2019 Total Loans

Mortgage loans:

Residential $ — — — — — 3 3

Total mortgage loans — — — — — 3 3

Commercial loans $ — — — 5,000 — 1,019 6,019

Consumer loans (1)

7 — — — — — 7

Total gross loans $ 7 — — 5,000 — 1,022 6,029

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

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

For the three months ended March 31, 2024, the Company recorded a $ 200,000 provision for credit losses on loans, compared to a $ 6.0 million provision for the same period in 2023.

The decrease in the provision for credit losses was largely a function of the period-over-period improvement in the economic forecast within our CECL model.

For the three months ended March 31, 2024, net charge-offs totaled $ 971,000 .

The following table summarizes the Company's gross charge-offs recorded during the three months ended March 31, 2024 by year of origination (in thousands):

2024 2023 2022 2021 2020 Prior to 2020 Total Loans

Mortgage loans:

Commercial $ — — — — — 707 707

Residential — — — — — 24 24

Total mortgage loans — — — — — 731 731

Commercial loans $ — — — — 1,606 188 1,794

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Total gross loans $ 6 — — — 1,606 189 1,801

(1) During the nine months ended September 30, 2023, charge-offs on consumer overdraft accounts totaled $ 221,000 , which are not included in the table above.

(1) During the three months ended March 31, 2024, charge-offs on consumer overdraft accounts totaled $ 65,000 , which are not included in the table above.

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

At September 30, 2023, there were 18 loans totaling $ 30.4 million, compared to 10 loans totaling $ 42.8 million at December 31, 2022, that were individually evaluated for impairment.

As of March 31, 2024, there were 14 loans totaling $ 40.1 million, compared to 17 loans totaling $ 42.3 million as of December 31, 2023, 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.

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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.

internally prepared collateral valuations based upon market assumptions regarding vacancy and capitalization rates, each as and where applicable.

Once the appraisal is received and reviewed, the specific reserves are adjusted to reflect the appraised value and evaluated for charge offs.

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

At September 30, 2023, the Company had collateral-dependent loans with a fair value of $ 5.0 million secured by business assets and $ 2.0 million secured by commercial real estate.

At 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.

As of March 31, 2024 and December 31, 2023, the Company had collateral-dependent loans with fair values of $ 20.9 million and $ 24.1 million secured by commercial real estate, respectively.

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.

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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 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.

Direct Installment Term extension greater than three months.

These modifications extend the term of the loan, which reduces the monthly payment requirement.

Effective January 1, 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty.

In 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty.

This guidance was applied on a modified retrospective basis.

Upon adoption of this guidance, the Company no longer establishes a specific reserve for loan modifications to borrowers experiencing financial difficulty.

Instead, these loan modifications are included in their respective pool and a historical loss rate is applied to the current loan balance to arrive at the quantitative and qualitative baseline portion of the allowance for credit losses.

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 during the three and nine months ended September 30, 2023 (in thousands):

For the three months ended September 30, 2023

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

Mortgage loans:

Multi-family $ — — 1,508 0.08 %

Total mortgage loans — — 1,508 0.02 %

Total gross loans $ — — 1,508 0.01 %

For the nine months ended September 30, 2023

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

Mortgage loans:

Multi-family $ — — 1,508 0.08 %

Total mortgage loans — — 1,508 0.02 %

The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 (in thousands):

For the three months ended March 31, 2024

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

Commercial loans $ — 7,187 — 0.29 %

Total gross loans $ — 7,187 — 0.07 %

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended September 30, 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 %

Total gross loans 2 2.23 %

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

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 (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 0 2.00 %

Total gross loans 0 2.00 %

There were no loan modifications made to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023, that subsequently defaulted.

The following table presents the aging analysis of loan modifications made to borrowers experiencing financial difficulty during the three months ended September 30, 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

Total gross loans $ 1,508 — — — — 1,508

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

There were no loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024, that subsequently defaulted.

The following table presents the aging analysis of loan modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 (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 $ 7,187 — — — — 7,187

Total gross loans $ 7,187 — — — — 7,187

Prior to our adoption of ASU 2022-02, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR.

However, our TDR accounting described herein was suspended for most of our loss mitigation activities through our election to account for certain eligible loss mitigation activities occurring between March 2020 and January 1, 2022 under the COVID-19 relief granted pursuant to the CARES Act and the Consolidated Appropriations Act of 2021.

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

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

For the three months ended

September 30, 2022

Troubled Debt Restructurings Number of

Loans Pre-Modification

Investment Post-Modification

Recorded Investment

Consumer loans 1 108 88

Total restructured loans 1 $ 108 88

For the nine months ended

September 30, 2022

Troubled Debt Restructurings Number of

Loans Pre-Modification

Investment Post-Modification

Recorded Investment

Mortgage loans:

Residential 2 $ 265 $ 204

Multi-family 1 1,618 1,583

Total mortgage loans 3 1,883 1,787

Commercial loans 2 378 273

Consumer loans 1 108 88

Total restructured loans 6 $ 2,369 $ 2,148

Durin g the nine months ended September 30, 2022, $ 921,000 of charge-offs were recorded on collateral-dependent impaired loans.

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

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

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

At September 30, 2023, the balance of PCD loans totaled $ 166.9 million with a related allowance for credit losses of $ 1.5 million.

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

As of March 31, 2024, the balance of PCD loans totaled $ 160.6 million with a related allowance for credit losses of $ 1.6 million.

The balance of PCD loans as of December 31, 2023 was $ 165.1 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.

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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 are to be 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.

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

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

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

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

The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades as of March 31, 2024 and December 31, 2023 (in thousands):