What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-08 compared with 2024-04-26 · 606 added, 272 removed, 901 unchanged (49% of the section changed)

3 unchanged sentences

Consolidated Statements of Financial Condition

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

June 30, 2024 (Unaudited) and December 31, 2023

(Dollars in Thousands)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Cash and due from banks $ 290,528 $ 180,241

2 unchanged sentences

Available for sale debt securities, at fair value 2,626,783 1,690,112

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

Held to maturity debt securities, net (fair value of $ 332,691 as of June 30, 2024 (unaudited) and $ 352,601 as of December 31, 2023)

350,528 363,080

1 unchanged sentence

Federal Home Loan Bank stock 100,068 79,217

Loans 10,842,707 10,873,701

Loans held for sale 4,450 1,785

Loans held for investment 18,759,330 10,871,916

Less allowance for credit losses 188,331 107,200

20 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 75,928,193 shares outstanding as of March 31, 2024 and 75,537,186 outstanding as of December 31, 2023

Common stock, $ 0.01 par value, 200,000,000 shares authorized, 137,565,966 shares issued and 130,380,393 shares outstanding as of June 30, 2024 and 75,537,186 outstanding as of December 31, 2023

Additional paid-in capital 1,868,643 989,058

Retained earnings 957,979 974,542

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

Accumulated other comprehensive (loss) income ( 139,964 ) ( 141,115 )

Treasury stock ( 129,115 ) ( 127,825 )

8 unchanged sentences

Consolidated Statements of Income

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

Three and six months ended June 30, 2024 and 2023 (Unaudited)

(Dollars in Thousands, except per share data)

Three months ended March 31,

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

2024 2023 2024 2023

Interest and dividend income:

4 unchanged sentences

Held to maturity debt securities 2,357 2,357 4,625 4,725

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

Total interest and dividend income 163,859 143,556

Due from banks, Federal funds sold and other short-term investments 1,859 948 3,041 1,793

Total interest income 247,811 149,896 411,670 293,452

Interest expense:

11 unchanged sentences

Bank-owned life insurance 3,323 1,534 5,140 3,018

Net loss on securities transactions ( 1 ) ( 5 )

Net (loss) gain on securities transactions ( 2,973 ) 29 ( 2,974 ) 24

Other income 969 1,283 1,766 4,552

7 unchanged sentences

Advertising and promotion expense 1,171 1,379 2,137 2,589

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

Merger-related expenses 18,915 1,960 21,117 3,060

1 unchanged sentence

Total non-interest expense 115,394 65,110 187,221 133,858

Income before income tax expense 42,970 54,990

Income tax expense 10,888 14,454

Net income $ 32,082 $ 40,536

(Loss) Income before income tax expense ( 21,318 ) 43,633 21,651 98,622

Income tax (benefit) expense ( 9,833 ) 11,630 1,055 26,083

Net (loss) income $ ( 11,485 ) $ 32,003 $ 20,596 $ 72,539

Basic earnings per share $ ( 0.11 ) $ 0.43 $ 0.23 $ 0.97

6 unchanged sentences

Consolidated Statements of Comprehensive Income

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

Three and six months ended June 30, 2024 and 2023 (Unaudited)

(Dollars in Thousands)

Three months ended March 31,

Net income $ 32,082 $ 40,536

Other comprehensive income (loss), net of tax:

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

2024 2023 2024 2023

Net (loss) income $ ( 11,485 ) $ 32,003 $ 20,596 $ 72,539

Other comprehensive income, net of tax:

Unrealized gains and losses on available for sale debt securities:

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

Reclassification adjustment for gains included in net income — —

Net unrealized gains (losses) arising during the period 11,561 ( 14,726 ) 1,604 6,138

Reclassification adjustment for losses included in net income 2,056 — 2,056 —

Total 13,617 ( 14,726 ) 3,660 6,138

Unrealized gains and losses on derivatives:

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

Net unrealized gains arising during the period 941 3,650 4,144 3,033

Reclassification adjustment for (gains) included in net income ( 2,582 ) ( 3,010 ) ( 5,469 ) ( 6,089 )

1 unchanged sentence

Amortization related to post-retirement obligations ( 355 ) ( 261 ) ( 1,184 ) ( 530 )

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

Total other comprehensive income (loss) 11,621 ( 14,347 ) 1,151 2,552

Total comprehensive income $ 136 $ 17,656 $ 21,747 $ 75,091

3 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

Three months ended March 31, 2023 (Unaudited)

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

(Dollars in Thousands)

For the three months ended March 31, 2023

For the three months ended June 30, 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 as of March 31, 2023 $ 832 $ 984,089 $ 940,533 $ ( 148,146 ) $ ( 127,814 ) $ ( 9,414 ) $ ( 3,289 ) $ 3,289 $ 1,640,080

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

Other comprehensive loss, net of tax — — — ( 14,347 ) — — — — ( 14,347 )

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

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

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

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

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

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

Allocation of Stock Award Plan ("SAP") shares — 1,997 — — — — — — 1,997

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

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

For the six months ended June 30, 2023

COMMONSTOCK ADDITIONAL

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 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 — — 72,539 — — — — — 72,539

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

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

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

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

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

2022-02, net of tax

— — 433 — — — — — 433

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

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

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

1 unchanged sentence

Allocation of ESOP shares — 243 — — — 1,623 — — 1,866

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

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

Allocation of SAP shares — 4,830 — — — — — — 4,830

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

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

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

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

Three months ended March 31, 2024 (Unaudited)

For the three and six months ended June 30, 2024 (Unaudited)

(Dollars in Thousands)

For the three months ended March 31, 2024

For the three months ended June 30, 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 as of March 31, 2024 $ 832 $ 990,582 $ 988,480 $ ( 151,585 ) $ ( 129,062 ) $ ( 4,085 ) $ ( 2,546 ) $ 2,546 $ 1,695,162

Net income — — ( 11,485 ) — — — — — ( 11,485 )

Other comprehensive loss, net of tax — — — 11,621 — — — — 11,621

Cash dividends paid — — ( 19,016 ) — — — — — ( 19,016 )

Distributions from deferred comp plans — 30 — — — — 148 ( 148 ) 30

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

Purchase of employee restricted shares to fund statutory tax withholding — — — — ( 53 ) — — — ( 53 )

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

Allocation of ESOP shares — ( 123 ) — — — 812 — — 689

Allocation of SAP shares — 1,904 — — — — — — 1,904

Shares issued due to acquisition 544 876,234 — — — — — — 876,778

Allocation of stock options — 16 — — — — — — 16

Balance as of June 30, 2024 $ 1,376 $ 1,868,643 $ 957,979 $ ( 139,964 ) $ ( 129,115 ) $ ( 3,273 ) $ ( 2,398 ) $ 2,398 $ 2,555,646

For the six months ended June 30, 2024

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

7 unchanged sentences

Allocation of SAP shares — 3,425 — — — — — — 3,425

Shares issued due to acquisition 544 876,234 — — — — — — 876,778

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

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

Balance as of June 30, 2024 $ 1,376 $ 1,868,643 $ 957,979 $ ( 139,964 ) $ ( 129,115 ) $ ( 3,273 ) $ ( 2,398 ) $ 2,398 $ 2,555,646

See accompanying notes to unaudited consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

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

Six months ended June 30, 2024 and 2023 (Unaudited)

(Dollars in Thousands)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization of intangibles 12,346 5,953

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

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

Deferred tax expense 4,419 357

Provision charge for credit losses 69,385 16,490

Deferred tax benefit ( 1,020 ) ( 2,332 )

Amortization of operating lease right-of-use assets 6,398 5,257

9 unchanged sentences

Net gain on sale of loans ( 385 ) ( 972 )

Net loss on securities transactions 1 5

Net loss (gain) on securities transactions 2,974 ( 24 )

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

Net gain on sale of foreclosed assets ( 203 ) ( 2,789 )

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

Increase in accrued interest receivable ( 7,634 ) ( 1,942 )

(Increase) decrease in other assets ( 27,968 ) 7,490

2 unchanged sentences

Cash flows from investing activities:

Net decrease in loans 34,378 14,278

Net decrease (increase) in loans 5,236 ( 285,500 )

Purchases of loans — ( 3,394 )

2 unchanged sentences

Purchases of investment securities held to maturity ( 15,122 ) ( 9,130 )

Proceeds from sales of available for sale debt securities 568,360 —

Proceeds from maturities, calls and paydowns of available for sale debt securities 122,363 92,681

2 unchanged sentences

Purchases of Federal Home Loan Bank stock ( 142,589 ) ( 137,055 )

Cash received, net of cash consideration paid for acquisition 194,548 —

BOLI claim benefits received 1,356 2,347

1 unchanged sentence

Purchases of premises and equipment ( 1,513 ) ( 2,959 )

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

Net cash provided by (used in) investing activities 817,373 ( 244,441 )

Cash flows from financing activities:

Net decrease in deposits ( 562,194 ) ( 301,904 )

PROVIDENT FINANCIAL SERVICES, INC.

AND SUBSIDIARY

Consolidated Statements of Cash Flows

Six months ended June 30, 2024 and 2023 (Unaudited)

(Dollars in Thousands)

Six months ended June 30,

Increase in mortgage escrow deposits 8,324 8,575

Cash dividends paid to stockholders ( 37,159 ) ( 36,727 )

Three months ended March 31,

Purchase of treasury stock — —

Purchase of employee restricted shares to fund statutory tax withholding ( 1,290 ) ( 1,671 )

Stock options exercised — 790

Proceeds from subordinated debentures 221,243 —

Proceeds from long-term borrowings — 446,531

Payments on long-term borrowings — ( 32,500 )

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

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

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

Net (decrease) increase in short-term borrowings ( 453,902 ) 98,313

Net cash (use in) provided by financing activities ( 824,978 ) 181,407

Net increase in cash and cash equivalents 110,306 22,364

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

7 unchanged sentences

Income taxes $ 18,419 $ 26,591

Non-cash investing activities:

Initial recognition of operating lease right-of-use assets $ 14,742 $ —

Initial recognition of operating lease liabilities $ 14,742 $ —

Transfer of loans receivable to foreclosed assets $ — $ 12,341

Acquisitions:

Non-cash assets acquired at fair value:

Investment securities $ 1,632,107 $ —

Loans held for sale 1,494

Loans held for investment 7,889,138 —

Bank-owned life insurance 160,646 —

Goodwill and other intangible assets 400,773 —

Bank premises and equipment 60,578 —

Other assets 269,251 —

Total non-cash assets acquired at fair value $ 10,413,987 $ —

Liabilities assumed

Deposits $ 8,622,924 $ —

Borrowings 785,927 —

Subordinated debentures 180,198 —

Other Liabilities 142,708 —

Total liabilities assumed $ 9,731,757 $ —

Common stock issued for acquisitions $ 876,778 $ —

See accompanying notes to unaudited consolidated financial statements.

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

The results of operations for the three and six months ended June 30, 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 months ended March 31, 2024 and 2023 (dollars in thousands, except per share amounts):

Three months ended March 31,

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three and six months ended June 30, 2024 and 2023 (dollars in thousands, except per share amounts):

Three months ended June 30,

Income Weighted

2 unchanged sentences

Outstanding Per

Net (loss) income $ ( 11,485 ) $ 32,003

Basic earnings per share:

(Loss) Income available to common stockholders $ ( 11,485 ) 102,957,521 $ ( 0.11 ) $ 32,003 74,823,272 $ 0.43

Dilutive shares — 6,915

Diluted earnings per share:

(Loss) Income available to common stockholders $ ( 11,485 ) 102,957,521 $ ( 0.11 ) $ 32,003 74,830,187 $ 0.43

Six months ended June 30,

Income Weighted

Outstanding Per

Income Weighted

Common Shares Outstanding Per

Net income $ 20,596 $ 72,539

4 unchanged sentences

Income available to common stockholders $ 20,596 89,116,590 $ 0.23 $ 72,539 74,766,848 $ 0.97

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.

Anti-dilutive stock options and awards as of June 30, 2024 and 2023, totaling 1.5 million shares and 1.3 million shares, respectively, were excluded from the earnings per share calculations.

Loans Receivable and Allowance for Credit Losses

1 unchanged sentence

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

For the three months ended March 31, 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.

For the three and six months ended June 30, 2024, an initial CECL provision for credit losses on loans and commitments to extend credit of $ 65.2 million was recorded as part of the Lakeland merger in accordance with GAAP requirements for accounting for business combinations.

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.

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

In accordance with GAAP, goodwill with an indefinite useful life is not amortized, but is evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances indicate potential impairment between annual measurement dates.

Goodwill with an indefinite useful life is not amortized, but is evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances indicate potential impairment between annual measurement dates.

Goodwill is analyzed for impairment at least once a year.

As permitted by GAAP, the Company prepares a qualitative assessment in determining whether goodwill may be impaired.

The Company prepares a qualitative assessment in determining whether goodwill may be impaired.

The factors considered in the assessment include macroeconomic conditions, industry and market conditions and overall financial performance of the Company, among others.

The Company completed its most recent annual goodwill impairment test as of July 1, 2024.

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.

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

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.

On May 16, 2024, the Company completed its merger with Lakeland Bancorp, Inc.

("Lakeland"), which added $ 10.91 billion to total assets, $ 7.91 billion to total loans, $ 8.62 billion to total deposits and 68 full-service banking offices in New Jersey and New York.

The Company expects to close 13 of the acquired Lakeland banking offices and nine legacy Bank branches in the third quarter of 2024 due to geographic overlap.

Under the merger agreement, each share of Lakeland common stock was converted into the right to receive 0.8319 shares of the Company's common stock, a total of 54,356,954 shares converted, plus cash in lieu of fractional shares.

The total consideration paid for the acquisition of Lakeland was $ 876.8 million.

In connection with the acquisition, Lakeland Bank, a wholly owned subsidiary of Lakeland, was merged with and into the Bank.

The acquisition was accounted for under the acquisition method of accounting.

Under this method of accounting, the purchase price has been allocated to the respective assets acquired and liabilities assumed based upon their estimated fair values, net of tax.

The excess of consideration paid over the estimated fair value of the net assets acquired totaled $ 190.9 million and was recorded as goodwill.

The following table summarizes the estimated fair values of the assets acquired and the liabilities assumed at the merger date, net of cash consideration paid (in thousands):

As of May 16, 2024

Assets acquired:

Cash and cash equivalents, net $ 194,548

Available for sale debt securities 1,585,993

Federal Home Loan Bank stock 46,113

Loans held for sale 1,494

Loans held for investment 7,906,326

Allowance for credit losses on PCD loans ( 17,188 )

Loans, net 7,889,138

Bank-owned life insurance 160,646

Banking premises and equipment 60,578

Accrued interest receivable 27,241

Goodwill 190,858

Other intangibles assets 209,915

Other assets 242,011

Total assets acquired $ 10,608,535

Liabilities assumed:

Deposits 8,622,924

Mortgage escrow deposits 5,532

Borrowed funds 785,927

Subordinated debentures 180,198

Other liabilities 137,176

Total liabilities assumed $ 9,731,757

Net assets acquired $ 876,778

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available.

As the Company finalizes its review of the acquired assets and liabilities, certain adjustments to the recorded carrying values and goodwill may be required.

Fair Value Measurement of Assets Assumed and Liabilities Assumed

The methods used to determine the fair value of the assets acquired and liabilities assumed in the Lakeland acquisition were as follows:

Securities Available for Sale

The estimated fair values of the available for sale debt securities, primarily comprised of U.S.

government agency mortgage-backed securities and U.S.

government agency and municipal bonds carried on Lakeland's balance sheet was confirmed using open market pricing provided by multiple independent securities brokers.

Management reviewed the open market quotes used in pricing the securities and a fair value adjustment was not recorded on the investments.

A fair value discount of $ 249.7 million was recorded on the investments.

Loans acquired from Lakeland were recorded at fair value, and there was no carryover related allowance for loan and lease losses.

The fair values of loans acquired from Lakeland were estimated using the discounted cash flow method based on the remaining maturity and repricing terms.

Cash flows were adjusted for expected losses and prepayments.

Projected cash flows were then discounted to present value based on:

the relative risk of the cash flows, taking into account the loan type, liquidity risk, the maturity of the loans, servicing costs, and a required return on capital;

and monthly principal and interest cash flows

were discounted to present value and summed to arrive at the calculated value of the loans.

The fair value of the acquired loans receivable had a gross amortized cost basis of $ 7.91 billion.

For loans acquired without evidence of more-than-insignificant deterioration in credit quality since origination, the Company recorded interest rate loan fair value and credit fair value adjustments.

Loans were grouped into pools based on similar characteristics, such as loan type, fixed or adjustable interest rates, payment type, index rate and caps/floors, and non-accrual status.

The loans were valued at the sub-pool level and were pooled at the summary level based on loan type.

Market rates for similar loans were obtained from various internal and external data sources and reviewed by management for reasonableness.

The average of these market rates was used as the fair value interest rate that a market participant would utilize.

A present value approach was utilized to calculate the interest rate fair value discount of $ 297.2 million.

The Company used historical annual average charge-off percentages for banking institutions identified as peers of the Company and Lakeland combined as a market-participant proxy to develop the life-of-loan loss rates per loan type for the Non-PCD loans.

The default and loss rates were then applied to the principal balance to arrive at the projected credit losses for each period, which resulted in a credit fair value discount of $ 82.4 million.

Loans acquired that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchased credit deteriorated (“PCD”) loans.

The Company evaluated acquired loans for deterioration in credit quality based on any of, but not limited to, the following:

(1) non-accrual status;

(2) modifications for borrowers experiencing financial difficulty;

(3) risk ratings of watch, special mention, substandard or doubtful;

and (4) loans greater than 59 days past due.

At the acquisition date, an estimate of expected credit losses was made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics.

This estimate of credit losses was calculated using management's best estimate of projected losses over the remaining life of the loans.

This represents the portion of the loan balances that has been deemed uncollectible based on the Company’s expectations of future cash flows for each respective PCD loan pool, given the outlook and forecasts.

The expected lifetime losses were calculated using historical losses observed at the Bank, Lakeland and peer banks.

A $ 17.2 million allowance for credit losses was recorded on PCD loans.

The interest rate fair value adjustment related to PCD loans will be substantially recognized as interest income on a level yield amortization or straight line method over the expected life of the loans.

The table below illustrates the fair value adjustments made to the amortized cost basis in order to present the fair value of the loans acquired (in thousands):

Gross amortized cost basis as of May 16, 2024 $ 8,323,589

Interest rate fair value adjustment on all loans ( 330,540 )

Credit fair value adjustment on non-PCD loans ( 82,359 )

Charge-offs on PCD Loans at acquisition ( 4,364 )

Allowance for credit losses on PCD loans ( 17,188 )

Fair value of acquired loans, net, as of May 16, 2024 $ 7,889,138

The table below is a summary of the PCD loans that were acquired from Lakeland as of the closing date (in thousands):

Gross amortized cost basis as of May 16, 2024 $ 564,147

Charge-offs on PCD Loans at acquisition ( 4,364 )

Interest component of expected cash flows (accretable difference) ( 33,365 )

Allowance for credit losses on PCD loans ( 17,188 )

Net PCD loans $ 509,230

Banking Premises and Equipment

The Company acquired 68 branches from Lakeland, 29 of which were owned premises.

The Company expects to close 13 of the acquired banking offices in the third quarter of 2024.

The fair value of Lakeland’s premises was determined based upon independent third-party appraisals performed by licensed appraisers in the market in which the premises are located.

Core Deposit Intangible

The fair value of the core deposit intangible was measured using a discounted cash flow approach by comparing the all-in cost of less rate sensitive deposits against an alternative funding source.

The discounted cash flow approach is used because there is

no reliable market participant data to support a market approach nor is there an effective measure to utilize the cost approach.

To calculate the value of core deposits, deposit account servicing costs (net of deposit fee income) and interest expense on deposits were compared to the cost of alternative funding sources by using an average of Federal Home Loan Bank of New York ("FHLBNY") advance rates and brokered CD rates as disclosed by market sources.

The projected cash flows were developed using projected deposit attrition rates.

The discount rate was calculated using the Capital Assets Pricing Model.

The core deposit intangible totaled $ 209.2 million and is being amortized over its estimated life of approximately 10 years based on dollar weighted deposit runoff on an annualized basis.

The core deposit intangible will be evaluated annually for impairment.

Bank Owned Life Insurance ("BOLI")

Lakeland's BOLI cash surrender value was $ 160.6 million with no fair value adjustment required.

Time Deposits

The fair value adjustment for time deposits represents a discount from the value of the contractual repayments of fixed-maturity deposits using prevailing market interest rates for similar-term time deposits.

The time deposit discount of approximately $ 1.2 million is being amortized into income on a level yield basis over the contractual life of the deposits.

The fair value of FHLBNY advances was determined based on a discounted cash flow analysis using a discount rate derived from FHLBNY rates as of May 16, 2024.

The cash flows of the advances were projected based on the scheduled payments of each advance.

Subordinated Debentures

At the valuation date, Lakeland had three outstanding trust preferred issuances and a subordinated debt issuance with an aggregate balance of $ 180.2 million, all of which was assumed by the Company on May 16, 2024 .

The fair value of trust preferred and subordinated debt issuances was determined based on a discounted cash flow analysis using a discount rate commensurate with yields and terms of comparable issuances.

The cash flows were projected through the remaining contractual term of the trust preferred issuance and based on the call date for the subordinated debt issuance.

Merger-Related Expenses

Merger-related expenses, which is a separate line in non-interest expense on the Consolidated Statements of Income, totaled $ 18.9 million and $ 21.1 million for the three and six months ended June 30, 2024, respectively, compared with $ 2.0 million and $ 3.1 million for the three and six months ended June 30, 2023.

Investment Securities

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 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.

As of June 30, 2024, the Company had $ 2.63 billion and $ 350.5 million in available for sale debt securities and held to maturity debt securities, respectively.

The total number of available for sale and held to maturity debt securities in an unrealized loss position as of June 30, 2024 totaled 1,168 , compared with 808 as of December 31, 2023.

The increase in the number of securities in an unrealized loss position as of June 30, 2024, was due to the addition of Lakeland securities, combined with 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 as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024

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 June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024

Treasury obligations $ 358,744 2 ( 23,715 ) 335,031

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

Government-agency obligations 164,690 1,672 ( 160 ) 166,202

Mortgage-backed securities 2,032,733 7,058 ( 190,607 ) 1,849,184

5 unchanged sentences

Treasury obligations $ 276,618 — ( 22,740 ) 253,878

Agency-guaranteed obligations 26,310 1,188 — 27,498

Government-agency 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

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).

Accrued interest on available for sale debt securities, which is excluded from the amortized cost, totaled $ 9.2 million and $ 4.9 million as of June 30, 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 June 30, 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.

March 31, 2024

June 30, 2024

Due in one year or less $ 56,503 57,494

4 unchanged sentences

Investments which pay principal on a periodic basis totaling $ 2.20 billion at amortized cost and $ 2.02 billion at fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.

For the three months ended March 31, 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.

For the three and six months ended June 30, 2024, proceeds from sales on securities in the available for sale debt securities portfolio totaled $ 568.4 million, with no gains and $ 3.0 million of losses recognized.

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

For the three and six months ended June 30, 2024 and 2023, there were no proceeds from calls on securities in the available for sale debt securities portfolio.

The number of available for sale debt securities in an unrealized loss position as of June 30, 2024 totaled 620 , compared with 436 as of December 31, 2023.

The increase in the number of securities in an unrealized loss position as of June 30, 2024, was primarily due to the addition of Lakeland, combined with higher current market interest rates compared to rates as of December 31, 2023.

All securities in an unrealized loss position were investment grade as of June 30, 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 as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024

The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the estimated fair value for held to maturity debt securities, excluding allowances for credit losses of $ 15,000 and $ 31,000 , as of June 30, 2024 and December 31, 2023, respectively (in thousands):

June 30, 2024

Treasury obligations $ 6,984 — — 6,984

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

Government-agency obligations 9,998 — ( 550 ) 9,448

State and municipal obligations 327,006 694 ( 17,671 ) 310,029

3 unchanged sentences

Treasury obligations $ 5,146 1 — 5,147

Agency-sponsored obligations 11,058 — ( 652 ) 10,406

Government-agency 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.

Accrued interest on held to maturity debt securities, which is excluded from the amortized cost, totaled $ 3.0 million and $ 3.1 million as of June 30, 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 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).

There were no sales of securities from the held to maturity debt securities portfolio for the three and six months ended June 30, 2024 and 2023.

For the three and six months ended June 30, 2024, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $ 1.2 million and $ 2.4 million, respectively.

As to these calls on securities, for the three months ended June 30, 2024, there were no gross gains or gross losses, while for the six months ended June 30, 2024, there were no gross gains, while gross losses totaled $ 1,200 .

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

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

The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio by contractual maturity, excluding an allowance for credit losses of $ 15,000 , as of June 30, 2024 are shown below (in thousands).

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

March 31, 2024

June 30, 2024

Due in one year or less $ 39,389 39,125

3 unchanged sentences

$ 350,544 332,691

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.

The number of held to maturity debt securities in an unrealized loss position as of June 30, 2024 totaled 548 , compared with 372 as of December 31, 2023.

The increase in the number of securities in an unrealized loss position as of June 30, 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-sponsored obligations;

• Government-agency 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 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.

The majority of the state and municipal and corporate obligations carry credit ratings from the rating agencies as of June 30, 2024 that were no lower than an A rating and the Company had no securities rated BBB or worse by Moody’s Ratings ("Moody's").

Credit Quality Indicators.

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

The following table provides the amortized cost of held to maturity debt securities by credit rating as of June 30, 2024 and December 31, 2023 (in thousands):

June 30, 2024

Total Portfolio AAA AA A BBB Not Rated Total

Treasury obligations $ 6,984 — — — — 6,984

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

Government-agency obligations 9,998 — — — — 9,998

State and municipal obligations 45,709 249,553 30,051 — 1,693 327,006

4 unchanged sentences

Treasury obligations $ 5,146 — — — — 5,146

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

Government-agency obligations 11,058 — — — — 11,058

State and municipal obligations 43,749 156,438 137,231 — 2,398 339,816

2 unchanged sentences

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

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.

As of June 30, 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 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.

government issued mortgage-backed securities, were grouped where possible under the credit rating of the issuer of the security.

Loans Receivable and Allowance for Credit Losses

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

March 31, 2024 December 31, 2023

Loans receivable as of June 30, 2024 and December 31, 2023 are summarized as follows (in thousands):

June 30, 2024 December 31, 2023

Mortgage loans:

10 unchanged sentences

Total loans $ 18,759,330 10,871,916

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.

Accrued interest on loans totaled $ 81.6 million and $ 50.9 million as of June 30, 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):

March 31, 2024

June 30, 2024

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

25 unchanged sentences

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 $ 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

The principal amounts of these non-accrual loans were $ 67.9 million and $ 49.6 million as of June 30, 2024 and December 31, 2023, respectively.

Included in non-accrual loans were $ 9.4 million and $ 23.2 million of loans which were less than 90 days past due as of June 30, 2024 and December 31, 2023, respectively.

There were no loans 90

days or greater past due and still accruing interest as of June 30, 2024 and December 31, 2023.

The amount of cash basis interest income that was recognized on impaired loans for the three and six months ended June 30, 2024 was not material.

The activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2024 and 2023 was as follows (in thousands):

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

Balance at beginning of period $ 65,890 38,292 2,247 106,429

Initial allowance on credit loans related to PCD loans 10,628 6,070 490 17,188

Provision charge to operations 58,790 5,038 2,226 66,054

Recoveries of loans previously charged-off 4 825 134 963

Loans charged-off — ( 2,222 ) ( 81 ) ( 2,303 )

Balance at end of period $ 135,312 48,003 5,016 188,331

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

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

2 unchanged sentences

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

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

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

Cumulative effect of adopting ASU 2022-02 ( 510 ) ( 43 ) ( 41 ) ( 594 )

Initial allowance on credit loans related to PCD loans 10,628 6,070 490 17,188

Provision charge to operations 51,210 12,963 2,081 66,254

2 unchanged sentences

Balance at end of period $ 135,312 48,003 5,016 188,331

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):

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) charge to operations 12,954 3,461 ( 15 ) 16,400

Recoveries of loans previously charged-off 6 301 258 565

Loans charged-off ( 728 ) ( 1,425 ) ( 168 ) ( 2,321 )

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

For the three and six months ended June 30, 2024, the Company recorded a $ 66.1 million and a $ 66.3 million provision for credit losses on loans, respectively.

The increases in provision for both periods was primarily attributable to an initial CECL provision for credit losses on loans of $ 60.1 million recorded as part of the Lakeland merger in accordance with GAAP requirements for accounting for business combinations.

For the three months ended June 30, 2024, net charge-offs totaled $ 1.3 million, which was primarily attributable to one commercial loan.

For the six months ended June 30, 2024, net charge-offs totaled $ 2.3 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 June 30, 2024 by year of origination (in thousands):

2024 2023 2022 2021 2020 Prior to 2020 Total Loans

3 unchanged sentences

Total gross loans $ 7 — 157 2,046 — 17 2,229

(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.

(1) During the three months ended June 30, 2024, charge-offs on consumer overdraft accounts totaled $ 74,000 , which are not included in the table above.

The following table summarizes the Company's gross charge-offs recorded during the six months ended June 30, 2024 by year of origination (in thousands):

2024 2023 2022 2021 2020 Prior to 2020 Total Loans

Commercial loans $ — — 158 2,047 1,606 206 4,017

Consumer loans (1)

13 — — — — 1 14

Total gross loans $ 13 — 158 2,047 1,606 207 4,031

(1) During the six months ended June 30, 2024, charge-offs on consumer overdraft accounts totaled $ 138,000 , which are not included in the table above.

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

2023 2022 2021 2020 2019 Prior to 2019 Total Loans

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

Consumer loans (1)

4 — — — — 3 7

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

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

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

2023 2022 2021 2020 2019 Prior to 2019 Total Loans

Mortgage loans:

Commercial $ — — — — — 707 707

Residential — — — — — 21 21

Total mortgage loans — — — — — 728 728

Commercial loans — — — — — 1,425 1,425

Consumer loans (1)

9 — — — — 13 22

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

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

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

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.

As of June 30, 2024, there were 18 loans totaling $ 54.6 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.

4 unchanged sentences

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 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.

The Company believes there have not been any significant time lapses since the receipt of the most recent appraisals.

As of June 30, 2024 and December 31, 2023, the Company had collateral-dependent loans with fair values of $ 18.4 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.

16 unchanged sentences

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 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

At adoption, 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 tables present the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2024 (in thousands):

For the three months ended June 30, 2024

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

Commercial loans — — 1,609 0.03 %

Total gross loans $ — — 1,609 0.01 %

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):

For the six months ended June 30, 2024

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

Commercial loans — — 8,796 0.19 %

Total gross loans $ — — 8,796 0.05 %

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

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

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

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

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

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2024 (in thousands):

Weighted-Average Months of Term Extension Weighted-Average Rate Increase

1 unchanged sentence

Total gross loans 3 1.25 %

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):

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2024 (in thousands):

Weighted-Average Months of Term Extension Weighted-Average Rate Increase

Commercial loans 1 1.63 %

Total gross loans 1 1.63 %

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

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

Commercial loans 10 0.28 %

Total gross loans 10 0.28 %

There were no loan modifications made to borrowers experiencing financial difficulty that subsequently defaulted during the three and six months ended June 30, 2024 and June 30, 2023, respectively.

The following table presents the aging analysis of loan modifications made to borrowers experiencing financial difficulty during the three months ended June 30, 2024 (in thousands):

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

1 unchanged sentence

Total gross loans $ 1,609 — — — — 1,609

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.

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 following table presents the aging analysis of loan modifications made to borrowers experiencing financial difficulty during the six months ended June 30, 2024 (in thousands):

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

Commercial loans 8,796 — — — — 8,796

Total gross loans $ 8,796 — — — — 8,796

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

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

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

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

Loans acquired by the Company that experienced more-than-insignificant deterioration in credit quality after origination, are classified as PCD loans.

As of June 30, 2024, the balance of PCD loans totaled $ 697.9 million with a related allowance for credit losses of $ 16.4 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.

In connection with the Lakeland merger, the Company evaluated acquired loans for deterioration in credit quality based on any of, but not limited to, the following:

(1) non-accrual status;

(2) modifications for borrowers experiencing financial difficulty;

(3) risk ratings of watch, special mention, substandard or doubtful;

and (4) loans greater than 59 days past due.

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.

Additionally for PCD loans, an allowance for credit losses was calculated using management's best estimate of projected losses over the remaining life of the loans.

The expected lifetime losses were calculated using historical losses observed at the Bank, Lakeland and peer banks.

A $ 17.2 million allowance for credit losses was recorded on PCD loans acquired from Lakeland.

The interest rate fair value adjustment related to PCD loans will be substantially recognized as interest income on a level yield or straight line method over the expected life of the loans.

The table below is a summary of the PCD loans that were acquired from Lakeland as of the closing date (in thousands):

Gross amortized cost basis as of May 16, 2024 $ 564,147

Charge-offs on PCD Loans at acquisition ( 4,364 )

Interest component of expected cash flows (accretable difference) ( 33,365 )

Allowance for credit losses on PCD loans ( 17,188 )

Net PCD loans $ 509,230

Management utilizes an internal nine-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics.

4 unchanged sentences

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 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):

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

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

The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades as of June 30, 2024 and December 31, 2023 (in thousands):