What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2025-02-28 compared with 2024-02-28 · 240 added, 245 removed, 1071 unchanged (31% of the section changed)

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The Company is a Delaware corporation which became the holding company for Provident Bank (the “Bank”) on January 15, 2003, following the completion of the Bank's conversion to a New Jersey-chartered capital stock savings bank.

On January 15, 2003, the Company issued an aggregate of 59,618,300 shares of its common stock, par value $0.01 per share in a subscription offering, and contributed $4.8 million in cash and 1,920,000 shares of its common stock to The Provident Bank Foundation, a charitable foundation established by the Bank.

On January 15, 2003, the Company issued an aggregate of 59,618,300 shares of its common stock, par value $0.01 per share in a subscription offering, and contributed $4.8 million in cash and 1,920,000 shares of its common stock, which amounted to $24.0 million in aggregate, to The Provident Bank Foundation, a charitable foundation established by the Bank.

The Company recognized an expense, net of income tax benefit, equal to the cash and fair value of the stock during 2003.

Conversion costs were deferred and deducted from the proceeds of the shares sold in the offering.

As a result of the conversion and related stock offering, the Company raised $567.2 million in net proceeds, of which $293.2 million was utilized to acquire all of the outstanding common stock of the Bank.

The Company owns all of the outstanding common stock of the Bank, and as such, is a bank holding company subject to regulation by the Federal Reserve Board.

On September 26, 2022, the Company, NL 239 Corp., a direct, wholly owned subsidiary of the Company (“Merger Sub”), and Lakeland entered into an Agreement and Plan of Merger (as may be amended, modified or supplemented from time to time in accordance with its terms, the “merger agreement”), pursuant to which the Company and Lakeland have agreed to combine their respective businesses.

Under the merger agreement, Merger Sub will merge with and into Lakeland, with Lakeland as the surviving entity (the “merger”), and as soon as reasonably practicable following the merger, Lakeland will merge with and into the Company, with the Company as the surviving entity (the “holdco merger”).

At a date and time following the holdco merger as determined by the Company, Lakeland Bank, a New Jersey state-charted commercial bank and a wholly owned subsidiary of Lakeland, will merge with and into the Bank, with the Bank as the surviving bank (the “bank merger” and, together with the merger and the holdco merger, the “mergers”).

The Company as the surviving institution will have approximately $25 billion in total assets and $20 billion in total deposits with banking locations across northern and central New Jersey and in surrounding areas of New York and Pennsylvania.

In the merger, Lakeland shareholders will receive 0.8319 of a share of the Company’s common stock for each share of Lakeland common stock they own.

Upon completion of the transaction, which remains subject to regulatory approvals and

other closing conditions, Company shareholders will own approximately 58% and Lakeland shareholders will own approximately 42% of the combined company.

The Company received stockholder approval to proceed with the merger at a special meeting of stockholders held on February 1, 2023.

Lakeland received shareholder approval to proceed with the merger at a special meeting of shareholders held on February 1, 2023.

On December 20, 2023, the Company and Lakeland agreed to extend the merger agreement to March 31, 2024, to provide additional time to obtain the required regulatory approvals.

The Company owns all of the outstanding common stock of the Bank, and as such, is a bank holding company subject to regulation by the Board of Governors of the Federal Reserve System ("Federal Reserve Board" or "Federal Reserve").

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

("Lakeland"), which added $10.59 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 closed 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 initially totaled $190.9 million and was recorded as goodwill.

ASC 805 provides for a period of time during which the acquirer may adjust provisional amounts recognized at the acquisition date to their subsequently determined acquisition-date fair values, referred to as the "measurement period." Adjustments during the measurement period are not limited to just those relating to assets acquired and liabilities assumed but apply to all aspects of business combination accounting (e.g., the consideration transferred).

Measurement-period adjustments are calculated as if they were known at the acquisition date, but are recognized in the reporting period in which they are determined.

Prior period information is not revised, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date.

In accordance with ASC 805, the Company recorded a measurement period adjustment and decreased goodwill by $10.5 million to $180.4 million, related to finalizing the valuation.

Capital Management.

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Provident Bank

Established in 1839, the Bank is a New Jersey-chartered capital stock savings bank operating full-service branch offices throughout northern and central New Jersey, Bucks, Lehigh and Northampton counties in Pennsylvania, as well as Queens and Nassau Counties in New York.

Established in 1839, the Bank is a New Jersey-chartered capital stock savings bank operating full-service branch offices throughout New Jersey, Bucks, Lehigh and Northampton counties in Pennsylvania, as well as Orange, Queens and Nassau Counties in New York.

As a community- and customer-oriented institution, the Bank emphasizes personal service and customer convenience in serving the financial needs of the individuals, families and businesses residing in its primary market areas.

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The Bank’s focus on transaction accounts and expanded products and services has enabled it to generate significant non-interest income.

In addition to traditional depository and lending fees, the Bank generates non-interest income from investment, insurance, wealth and asset management services it offers to generate non-interest income.

In addition to traditional depository and lending fees, the Bank generates non-interest

income from investment, insurance, wealth and asset management services it offers to generate non-interest income.

Total non-interest income was $94.1 million for the year ended December 31, 2024, compared with $79.8 million for the year ended December 31, 2023, of which wealth management income, fee income and insurance agency income were $30.5 million, $34.1 million and $16.2 million, respectively, for the year ended December 31, 2024, compared with $27.7 million, $24.4 million and $13.9 million, respectively, for the year ended December 31, 2023.

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As of December 31, 2024, 57.73% of the Bank’s loan portfolio had a term to maturity of one year or less, or had adjustable interest rates.

As of December 31, 2023, the Bank’s securities portfolio totaled $2.13 billion and had an expected average life of 5.48 years.

As of December 31, 2024, the Bank’s held to maturity and available for sale securities portfolio totaled $3.21 billion and had an expected average life of 5.32 years.

The Company and the Bank are headquartered in Jersey City, New Jersey, and each maintain administrative offices in Iselin, New Jersey.

As of December 31, 2023, the Bank operated a network of 94 full-service banking offices throughout fourteen counties in northern and central New Jersey, as well as three counties in Pennsylvania and two counties in New York.

The Bank maintains satellite loan production offices in Convent Station, Flemington, Paramus and Sea Girt, New Jersey, as well as in Bethlehem, Newtown and Plymouth Meeting, Pennsylvania and Nassau and Queens County, New York.

The Bank’s lending activities, though concentrated in the communities surrounding its offices, extend predominantly throughout New Jersey, eastern Pennsylvania and Nassau and Queens County, New York.

As of December 31, 2024, the Bank operated a network of 140 full-service banking offices throughout fourteen counties in New Jersey, as well as three counties in Pennsylvania and three counties in New York.

The Bank maintains satellite loan production offices throughout New Jersey, as well as in Bethlehem, Philadelphia and Plymouth Meeting, Pennsylvania and Nassau and Orange County, New York.

The Bank’s primary market area includes a mix of urban and suburban communities, and has a diversified mix of industries including pharmaceutical, manufacturing, network communications, insurance and financial services, healthcare, and retail.

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According to the U.S.

Bureau of Labor Statistics, the unemployment rate in New Jersey was 4.8% as of December 31, 2023, an increase from 3.4% as of December 31, 2022.

The unemployment rate in Pennsylvania was 3.5% as of December 31, 2023, a decrease from 3.9% as of December 31, 2022.

The unemployment rate in New York was 4.5% as of December 31, 2023, an increase from 4.3% as of December 31, 2022.

Bureau of Labor Statistics, the preliminary unemployment rate in New Jersey was 4.6% as of December 31, 2024, a decrease from 4.8% as of December 31, 2023.

The preliminary unemployment rate in Pennsylvania was 3.6% as of December 31, 2024, an increase from 3.4% as of December 31, 2023.

The preliminary unemployment rate in New York was 4.4% as of December 31, 2024, a decrease from 4.6% as of December 31, 2023.

Within its primary market areas in New Jersey, Pennsylvania and New York, the Bank had an approximate 4.71%, 0.64% and 0.20% share of bank deposits as of June 30, 2024, respectively, the latest date for which statistics are available.

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Generally, these loans have maturities of either 5 or 10 years.

The Bank has historically provided construction loans for commercial projects, including residential rental and industrial projects, that will be retained as investments by the borrowers and to a lesser extent single family and condominium projects

intended for sale.

The Bank underwrites most construction loans for a term of three years or less.

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Most commercial lines of credit are made on a floating interest rate basis and most term loans are made on a fixed interest rate basis, usually with terms of five years or less.

Provident also has an asset-based lending department which specializes in utilizing particular assets to fund the working capital needs of borrowers.

Additionally, the Bank provides warehouse lines of credit used by mortgage bankers to originate one-to-four family residential mortgage loans that are pre-sold into the secondary mortgage market, which includes state and national banks, national mortgage banking firms, insurance companies and government-sponsored enterprises, including the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and others.

Residential mortgage loans are primarily underwritten to standards that allow the sale of the loans to the secondary markets, primarily to the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”).

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Home equity loans and home equity lines of credit that are secured by a first or second mortgage lien on the borrower’s residence comprise the largest category of the Bank’s consumer loan portfolio.

Loan Portfolio Composition.

Set forth below is selected information concerning the composition of the loan portfolio by type (after deductions for deferred fees and costs, unearned discounts and premiums and allowances for credit losses) at the dates indicated.

The allowance for credit losses for 2023, 2022, 2021 and 2020 were based upon the adoption of the current expected credit loss ("CECL") guidance, while credit losses for 2019 were based upon the incurred loss methodology:

Loans Held for Investment Portfolio Composition.

Set forth below is selected information concerning the composition of the loans held for investment portfolio by type (after deductions for deferred fees and costs, unearned discounts and premiums and allowances for credit losses) at the dates indicated.

As of December 31,

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Consumer loans 613,819 3.32 299,164 2.78 304,780 3.00 327,442 3.45 492,566 5.07

Total gross loans 10,884,683 101.10 10,261,645 100.99 9,593,879 100.98 9,839,858 101.22 7,338,310 100.84

Total gross loans held for investment 18,667,570 101.09 10,884,683 101.10 10,261,645 100.99 9,593,879 100.98 9,839,858 101.22

Premiums on purchased loans 1,338 0.01 1,474 0.01 1,380 0.01 1,451 0.02 1,566 0.02

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Total loans, net $ 18,465,938 100.00 % $ 10,766,501 100.00 % $ 10,160,860 100.00 % $ 9,500,884 100.00 % $ 9,721,424 100.00 %

Loan Maturity Schedule.

The following table sets forth certain information as of December 31, 2023, regarding the maturities of loans in the loan portfolio.

Loan Held for Investment Maturity Schedule.

The table sets forth certain information as of December 31, 2024, regarding the maturities of loans in the loans held for investment portfolio.

Demand loans having no stated schedule of repayment and no stated maturity, and overdrafts are reported as due within one year.

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Greater than Fifteen Years

Purchase Accounting Adjustments ("PAA") Total

(In thousands)

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If applicable, a tenant analysis and market analysis are part of the underwriting.

Generally, for commercial real estate secured loans in excess of $1.0 million and for all other commercial real

estate loans where it is deemed appropriate, the Bank requires environmental professionals to inspect the property and ascertain any potential environmental risks.

Generally, for commercial real estate secured loans in excess of $1.0 million and for all other commercial real estate loans where it is deemed appropriate, the Bank requires environmental professionals to inspect the property and ascertain any potential environmental risks.

In accordance with regulatory guidelines, the Bank requires a full independent appraisal for commercial real estate properties.

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The Bank’s policy also requires that a property inspection of commercial mortgages over $2.5 million be completed at least every 18 months, or more frequently when warranted.

The Bank’s largest commercial mortgage loan as of December 31, 2023 was a $37.8 million loan secured by a first leasehold mortgage lien on two adjacent industrial warehouse buildings totaling 675 thousand square feet located in Aberdeen, Maryland.

The properties are 100% leased to two large investment grade tenants.

This refinance was for an existing sponsor client that is a large real estate investment group based in New York City that specializes in the purchase of warehouse distribution facilities located in the Northeast and Midwest.

The loan has a risk rating of “3” or of “acceptable quality” and was performing in accordance with its terms and conditions as of December 31, 2023.

The Bank’s largest commercial mortgage loan as of December 31, 2024 was a $42.2 million loan secured by a first leasehold mortgage lien on a retail property totaling 96 thousand square feet located in New York, New York.

The property is 100% leased to four retail tenants, two of which are considered investment grade and occupy 61% of the leasable space.

The LTV is 58% and is personally guaranteed by three very strong owners.

The loan has a risk rating of “3” or of “average quality” and was performing in accordance with its terms and conditions as of December 31, 2024.

(For the Bank’s largest group borrower exposure —see discussion on “Loans to One Borrower”).

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The underwriting standards and procedures that are used to underwrite commercial real estate loans are used to underwrite multi-family loans, except the loan-to-value ratio generally should not exceed 80% of the appraised value of the property, the debt-service coverage should be a minimum of 1.15 times and an amortization period of up to 30 years may be used.

The Bank’s largest multi-family loan as of December 31, 2023 was a $42.2 million loan secured by first mortgage liens on four, three to nine story apartment buildings totaling 283 units, located in Jamaica (Queens), New York.

The project sponsor has over 40 years of investment, repositioning, and management experience in multi-family real estate in Queens County, New York.

The Bank’s largest multi-family loan as of December 31, 2024 was a $56.2 million loan secured by a first mortgage lien on a five-story apartment building totaling 275 units plus parking and amenity space, located in Willow Grove, Pennsylvania.

The project sponsor has over 35 years of investment and management experience in multi-family real estate in the Northeastern USA.

The loan has a risk rating of “4” or of “acceptable quality” and was performing in accordance with its terms and conditions as of December 31, 2024.

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Similarly, commercial construction loans usually have commitments for significant pre-leasing, or funds are held back until the leases are finalized.

As of December 31, 2023, the Bank's construction and land development portfolio balance to capital ratio was approximately 47%.

As of December 31, 2024, the Bank's construction and land development portfolio balance to total risk-based capital ratio was approximately 36%.

Given the current economic environment, this ratio is being closely managed and has been reducing moderately over time.

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The Bank also employs other means to mitigate the risk of the construction lending process.

On commercial construction projects that the developer maintains for rental, the Bank typically holds back funds for tenant improvements until a lease is executed.

On commercial construction projects that the developer maintains for rent, the Bank typically holds back funds for tenant improvements until a lease is executed.

For single family and condominium financing, the Bank generally requires payment for the release of a unit that exceeds the amount of the loan advance attributable to such unit.

The Bank’s largest construction loan as of December 31, 2023 was a $45.5 million commitment secured by a first mortgage lien on property and improvements related to the construction of a 165-unit, multi-family luxury apartment complex in Wilmington, Delaware.

The Bank’s largest construction loan as of December 31, 2024 was a $45.0 million commitment secured by a first mortgage lien on property and improvements related to the construction of a 334-unit, multi-family apartment complex in Linden, New Jersey.

The loan had an outstanding balance of $2.5 million as of December 31, 2024.

This loan closed in 2022 with construction completion and lease-up expected in 2024.

The project sponsor is an experienced and long-standing real estate owner and developer based in Pennsylvania with a successful track record in the development and management of commercial real estate and is an existing client.

The total loan amount is $90.0 million, 50% of which is co-led with another bank.

This loan closed in 2024 with construction completion expected in mid-2026 and lease-up through 2027.

The project sponsor has over 35 years of multi-family development, investment and management experience in New Jersey and Pennsylvania and is located in New Jersey.

The loan has a risk rating of “4” or of “acceptable quality” and was performing in accordance with its terms and conditions as of December 31, 2024.

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The Bank originates both fixed-rate and adjustable-rate mortgages.

As of December 31, 2023, $1.16 billion or 10.8% of the total loan portfolio consisted of residential real estate loans.

As of December 31, 2024, $2.01 billion or 10.9% of the total loan portfolio consisted of

residential real estate loans.

Of the one- to four-family loans at that date, 76.9% were fixed-rate and 23.1% were adjustable-rate loans.

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The percentage of loans sold into the secondary market will vary depending upon interest rates and the Bank’s strategies for managing exposure to interest rate risk.

In 2023, one residential real estate loan originated totaling $208,000 was sold into the secondary market.

In 2024, residential real estate loans originated that were sold into the secondary market totaled $48.3 million.

The retention of adjustable-rate mortgages, as opposed to longer-term, fixed-rate residential mortgage loans, helps reduce the Bank’s exposure to interest rate risk.

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The Bank has “Preferred Lender” status with the SBA, allowing a more streamlined application and approval process.

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

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

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

Eligibility ended for this program in May of 2021.

PPP loans are included in our commercial loan portfolio.

As of December 31, 2023, the Company secured 2,067 PPP loans for its customers totaling $682.0 million, which includes both the initial round and the second round of PPP.

As of December 31, 2023, 2,054 PPP loans totaling $679.4 million were forgiven.

The balance as of December 31, 2023 for PPP loans was $2.5 million.

The underwriting of a commercial loan is based upon a review of the financial statements of the prospective borrower and guarantors.

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As a result, the availability of funds for the repayment of commercial loans may be substantially dependent on the success of the business itself and the general economic environment.

The Bank’s largest commercial loan commitment as of December 31, 2023 was a $60.0 million working capital line of credit to a large New Jersey based automobile leasing company.

The loan, which was originated in late 2021, has a four-year term and is secured by lease contracts and the underlying vehicles.

Funding is limited to the aggregate net book value of eligible leases pledged at any time.

The Bank’s largest commercial loan commitment as of December 31, 2024 was a $67.5 million fully amortizing term loan to a large New Jersey-based specialty pharmaceutical company.

The loan to this long-standing client, which was originated in late 2024, has a seven-year term and is secured by substantially all the assets of the company.

This loan in conjunction with new subordinated debt and cash-on-hand was used to refinance higher cost 3rd party debt and is classified as a

highly leveraged transaction (HLT) per Bank Policy.

It is expected that this borrower will de-leverage rapidly over the next 2 years.

The loan has a risk rating of “4” or of “acceptable quality”.

As of December 31, 2023, there was no outstanding balance under the line.

(For the Bank’s largest group borrower exposure —see discussion on “Loans to One Borrower”).

The Bank also has a dedicated asset-based lending group (ABL Group) as part of the Lakeland merger which is staffed by highly experienced ABL lenders.

The ABL Group had loan commitments totaling $175.4 million with loans outstanding of $125.6 million as of December 31, 2024.

ABL is a specialized type of formula-based secured lending against the verified value of a company’s assets.

The ABL Group primarily provides lines of credit against a discounted value of eligible accounts receivable and inventory and term loans against a discounted appraised value of fixed assets.

Commercial mortgages against a company’s appraised owner-occupied real estate may also be provided in conjunction with the overall relationship.

Thorough due diligence is conducted on the company and the assets being financed which typically includes a field examination of its books and records and working assets and 3rd party appraisals of its fixed assets and owner-occupied real estate when applicable.

Loan monitoring is also enhanced and can be daily if necessary and includes detailed reporting on the company’s performance and lendable assets, periodic field examinations and appraisals when applicable.

The loans and underlying collateral are also continuously tracked using a specialized asset-based lending loan and collateral system to ensure that the loan remains within its lendable collateral value.

Consumer Loans .

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Consumer loans represented 3.3% of the total loan portfolio as of December 31, 2024.

Home equity loans and home equity lines of credit constituted 94.65% of the consumer loan portfolio and secured personal lines of credit originated through Beacon Trust constitute 4.71% of the consumer loan portfolio as of December 31, 2023.

Home equity loans and home equity lines of credit constituted 74.2% of the consumer loan portfolio and secured personal lines of credit originated through Beacon Trust Company constitute 0.1% of the consumer loan portfolio as of December 31, 2024.

The remaining 25.7% of the consumer loan portfolio includes personal loans and unsecured lines of credit, direct auto loans and recreational and marine vehicle loans.

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Net increase (decrease) $ 7,948,122 $ 624,818 $ 667,259

(1) Other items, net include charge-offs, deferred fees and expenses, discounts and premiums.

(1) Other items include loans transferred to held for sale, accretion of purchase accounting marks, charge-offs, deferred fees and expenses, discounts and premiums.

Loan Approval Procedures and Authority.

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All commercial loan approvals require dual signature authority.

The largest individual lending authority is $15.0 million for unsecured loans and $20.0 million for secured loans, which is only available to the Chief Executive Officer, the Chief Lending Officer and the Chief Credit Officer.

The largest individual lending authority is $20.0 million for commercial business loans and $30.0 million for commercial real estate loans, which is only available to the Chief Lending Officer and the Chief Credit Officer.

Loans in excess of these limits, or which when combined with existing credits of the borrower or related borrowers exceed these limits, are presented to the management Credit Committee for approval.

The Credit Committee currently consists of eight senior officers including the Chief Executive Officer, the Chief Lending Officer, the Chief Financial Officer, the Chief Credit Officer, the Chief Administrative Officer, the Director of Credit Risk and the Lending Chief of Staff.

The Credit Committee currently consists of ten senior officers including the Chief Executive Officer, the Chief Lending Officer, the Chief Financial Officer, the Chief Credit Officer (Chair), the Senior Credit Officer, the Director of Credit Risk Management and the Director of Commercial Underwriting.

While the Bank discourages loan policy exceptions, based upon reasonable business considerations, exceptions to the policy may be warranted.

The business reason and mitigants for the exception must be noted on the loan approval document.

The policy exception requires the approval of the Chief Lending Officer, Lending Chief of Staff or the Department Manager of the lending department responsible for the underlying loan, if it is within their approval authority limit.

The policy exception requires the approval of the Chief Lending Officer, Chief Credit Officer, Credit Officer or the Department Manager of the lending department responsible for the underlying loan, if it is within their approval authority limit.

All other policy exceptions must be approved by the Credit Committee.

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When the lender learns of important financial developments, the risk rating is reviewed accordingly.

Risk ratings are subject to review by the Credit Department during the underwriting, lending review and loan review processes.

Risk ratings are

subject to review by the Credit Department during the underwriting, lending review and loan review processes.

Loan review examinations are performed by an independent third party which validates the risk ratings on a sample basis.

In addition, a risk

rating can be adjusted at the weekly Credit Committee meeting and quarterly at management’s Credit Risk Management Committee, which meets to review loans rated a “Pass/Watch” ("5") or worse.

In addition, a risk rating can be adjusted at the weekly Credit Committee meeting and quarterly at management’s Credit Risk Management Committee, which meets to review loans rated a “Pass/Watch” ("5") or worse.

The Bank requires an annual review be performed for commercial and commercial real estate loans above certain dollar thresholds, depending on loan type, to help determine the appropriate risk ratings.

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As of December 31, 2024, the Bank’s largest group exposure with an individual borrower and its related entities was $206.1 million.

This group exposure consisted of three multi-family commercial real estate loans totaling $45.3 million, secured by three properties in Delaware, two construction loans totaling $87.5 million, secured by two multi-family properties in Delaware and Pennsylvania, and $1.7 million in interest rate swap exposure.

The loans have an average risk rating of “4”.

The borrower, headquartered in Pennsylvania, is an experienced real estate owner and developer in the states of Delaware and Pennsylvania.

As of December 31, 2023, all of the loans in this lending relationship were performing in accordance with their respective terms and conditions.

As of December 31, 2023, the Bank had $1.91 billion in loans outstanding to its 50 largest borrowers and their related entities.

This group exposure consisted of three multi-family commercial real estate loans totaling $107.0 million, secured by three properties in New Jersey and Pennsylvania, three industrial construction loans totaling $71.7 million, secured by three properties in Pennsylvania and Delaware, an office secured commercial real estate loan totaling $3.8 million located in Pennsylvania, two industrial secured commercial real estate loans totaling $3.0 million located in Pennsylvania, an unsecured line of credit totaling $10.4 million, swap exposure totaling $7.9 million on two multi-family loans, letter of credit exposure totaling $2.1 million, and ACH exposure totaling $0.2 million.

The loans have an average risk rating of “4 – Acceptable Quality”.

The borrower, headquartered in New Jersey, is an experienced Northeast focused real estate owner and developer primarily of multi-family and industrial properties.

As of December 31, 2024, all loans in this lending relationship were performing in accordance with their respective terms and conditions.

As of December 31, 2024, the Bank had $3.31 billion or 17.7% in loans outstanding to its 50 largest borrowers and their related entities.

ASSET QUALITY

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These reports include information on impaired loans, delinquent loans, criticized and classified assets, and foreclosed assets.

An impaired loan is defined as a non-homogeneous loan greater than $1.0 million for which it is probable, based on current

information, that the Bank will not collect all amounts due under the contractual terms of the loan agreement.

An impaired loan is defined as a non-homogeneous loan greater than $1.0 million for which it is probable, based on current information, that the Bank will not collect all amounts due under the contractual terms of the loan agreement.

Smaller balance homogeneous loans including residential mortgages and other consumer loans are evaluated collectively for impairment and are excluded from the definition of impaired loans.

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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.

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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.

The Company implemented various consumer and commercial loan modification programs to provide its borrowers relief from the economic impacts of COVID-19.

In accordance with the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), the Company elected to not apply troubled debt restructuring classification to any COVID-19 related loan modifications that occurred after March 1, 2020 to borrowers who were current as of December 31, 2019.

Accordingly, these modifications are exempt from troubled debt restructuring classification under U.S.

generally accepted accounting principles (“GAAP”) and were not classified as TDRs.

In addition, for loans modified in response to the COVID-19 pandemic that did not meet the above criteria (e.g., current payment status as of December 31, 2019), the Company applied the guidance included in an interagency statement issued by the bank regulatory agencies.

This guidance states that loan modifications performed in light of the COVID-19 pandemic, including loan payment deferrals that are up to six months in duration, that were granted to borrowers who were current as of the implementation date of a loan modification program or modifications granted under government mandated modification programs, are not TDRs.

For loan modifications that include a payment deferral and are not TDRs, the borrower’s past due and non-accrual status have not been impacted during the deferral period.

The majority of our deferrals initially consisted of 90-day principal and interest deferrals with additional deferral periods granted on a case-by-case basis at the Bank’s option.

As of December 31, 2023, there are no remaining deferrals related to the CARES Act.

Interest income stops accruing on loans when interest or principal payments are 90 days in arrears or earlier when the timely collectability of such interest or principal is doubtful.

When the accrual of interest on a loan is stopped, the loan is designated as a non-accrual loan and the outstanding unpaid interest previously credited is reversed.

A non-accrual loan is

returned to accrual status when factors indicating doubtful collection no longer exist, the loan has been brought current and the borrower demonstrates some period (generally six months) of timely contractual payments.

A non-accrual loan is returned to accrual status when factors indicating doubtful collection no longer exist, the loan has been brought current and the borrower demonstrates some period (generally six months) of timely contractual payments.

Federal and state regulations as well as the Bank’s policy require the Bank to utilize an internal risk rating system as a means of reporting problem and potential problem assets.

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Assets classified as “doubtful” have all of the weaknesses inherent in those classified “substandard” with the added characteristic that the weaknesses present make “collection or liquidation in full,” on the basis of currently existing facts, conditions, and values, “highly questionable and improbable.” Assets classified as “loss” are those considered “uncollectible” and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted.

Assets which do not currently expose the Bank to sufficient risk to warrant classification in one of the aforementioned categories, but possess potential weaknesses, are designated “special mention.” When the Bank classifies one or more assets, or portions thereof, as “loss,” the Bank is required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge-off such amount.

Assets which do not

currently expose the Bank to sufficient risk to warrant classification in one of the aforementioned categories, but possess potential weaknesses, are designated “special mention.” When the Bank classifies one or more assets, or portions thereof, as “loss,” the Bank is required either to establish a specific allowance for losses equal to 100% of the amount of the asset so classified or to charge-off such amount.

Management performs a quarterly evaluation of the adequacy of the allowance for credit losses.

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Loans are classified in accordance with the risk rating system described previously.

As of December 31, 2023, $70.4 million of loans were classified as “substandard,” which consisted of $54.8 million in commercial loans, $13.7 in commercial mortgage, construction and multi-family mortgage loans, $1.3 million in residential loans and $634,000 in consumer loans.

As of December 31, 2024, $293.2 million of loans were classified as “substandard,” which consisted of $180.0 million in commercial loans, $107.3 million in commercial mortgage, construction and multi-family mortgage loans, $4.5 million in residential loans and $1.4 million in consumer loans.

Within the substandard classification, $97.4 million were purchased credit deteriorated ("PCD") loans.

There was one commercial loan totaling $1.7 million, classified as "doubtful" or “loss” as of December 31, 2023.

As of December 31, 2024, $208.9 million of loans were designated “special mention.” Within the special mention classification, $62.1 million were PCD loans.

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Total non-performing loans to total loans 0.39 % 0.46 % 0.57 % 0.50 % 0.89 %

Non-performing (i.e., non-accruing) commercial mortgage loans decreased $23.1 million to $5.2 million as of December 31, 2023, from $28.2 million as of December 31, 2022.

Non-performing commercial mortgage loans consisted of seven loans as of December 31, 2023.

Of these seven loans, one loan totaling $95,600 was a PCD loan.

The largest non-performing commercial mortgage loan was a $3.0 million loan secured by a first mortgage on a retail building located in Wayne, New Jersey.

Non-performing commercial loans increased $17.3 million, to $41.5 million as of December 31, 2023, from $24.2 million as of December 31, 2022.

Non-performing (i.e., non-accruing) commercial mortgage loans increased $15.7 million to $20.9 million as of December 31, 2024, from $5.2 million as of December 31, 2023.

Non-performing commercial mortgage loans consisted of 17 loans as of December 31, 2024.

Of these 17 loans, nine loans totaling $5.9 million were PCD loans.

The largest non-performing commercial mortgage loan was a $7.3 million loan secured by a first mortgage on a retail shopping center located in Atlantic City, New Jersey.

Non-performing commercial loans decreased $17.2 million, to $24.2 million as of December 31, 2024, from $41.5 million as of December 31, 2023.

Non-performing commercial loans as of December 31, 2024 consisted of 65 loans, of which 16 loans were under 90 days past-due.

Of these non-performing commercial loans, four were PCD loans totaling $1.2 million.

Of these non-performing commercial loans, 37 were PCD loans totaling $4.9 million.

The largest non-performing commercial loan relationship consisted of three loans with aggregate outstanding balances of $4.1 million as of December 31, 2024.

These loans are secured by real estate and all business assets.

These loans have matured and the borrower is in the process of an orderly wind-down of their operations.

Non-performing construction loans decreased $1.1 million to $771,000 as of December 31, 2023, from $1.9 million as of December 31, 2022.

Non-performing construction loans as of December 31, 2023 consisted of one PCD loan.

These loans are secured by all business assets.

Non-performing construction loans increased $12.5 million to $13.2 million as of December 31, 2024, from $771,000 as of December 31, 2023.

Non-performing construction loans as of December 31, 2024 consisted of two loans, of which one was

There were two non-performing construction loans in 2023.

Non-performing multi-family mortgage loans consisted of one loan totaling $744,000 as of December 31, 2023, compared to two non-performing multi-family mortgage loans totaling $1.6 million as of December 31, 2022.

The largest non-performing construction loan was a $12.3 million loan residential development project in Jackson, New Jersey secured by a first mortgage on the land and completed and to-be completed housing units.

Non-performing multi-family mortgage loans consisted of six loans totaling $7.5 million as of December 31, 2024, compared to one non-performing multi-family mortgage loan totaling $744,000 as of December 31, 2023.

Of these six loans, four loans totaling $2.1 million were PCD loans.

The largest non-performing multi-family mortgage loan was a $3.7 million loan secured by a first mortgage on residential condominium units in Brooklyn, New York.

As of December 31, 2024, the Company held $9.5 million of foreclosed assets, compared with $11.7 million as of December 31, 2023.

Foreclosed assets as of December 31, 2024 are carried at fair value based on recent appraisals and valuation estimates, less estimated selling costs.

During the year ended December 31, 2023, there were four additions to foreclosed assets with an aggregate carrying value of $15.1 million, four properties sold with an aggregate carrying value of $3.7 million and one write-down of $2.0 million.

During the year ended December 31, 2024, there were four properties sold with an aggregate carrying value of $861,000 and one write-down of a foreclosed commercial property of $1.3 million.

Foreclosed assets at December 31, 2024 consisted primarily of commercial real estate.

Non-performing assets totaled $81.5 million, or 0.34% of total assets as of December 31, 2024, compared to $61.3 million, or 0.43% of total assets as of December 31, 2023.

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The Company's current forecast period is six quarters, with a four-quarter reversion period to historical average macroeconomic factors.

The Company's economic forecast is approved by the Company's Allowance for Credit Loss ("ACL") Committee.

The Company's economic forecast is approved by the Company's ACL Committee.

The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a quarterly basis, when similar risk characteristics exist.

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management has a reasonable expectation that a modification will be executed with an individual borrower;

or when an extension or renewal option is included in the original contract and is not unconditionally cancellable by the Company.

or when an extension or renewal option is included in the original contract and is not unconditionally cancellable by

Management will assess the likelihood of the option being exercised by the borrower and appropriately extend the maturity for modeling purposes.

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Qualitative factors are based on portfolio concentration levels, model imprecision, changes in industry conditions, changes in the Company’s loan review process, changes in the Company’s loan policies and procedures, and economic forecast uncertainty.

One of the most significant judgments involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period.

One of the most significant judgments involved in estimating the Company’s allowance for credit losses on loans relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period.

As of December 31, 2024, the model incorporated Moody’s baseline economic forecast, as adjusted for qualitative factors, as well as an extensive review of classified loans and loans that were classified as impaired with a specific reserve assigned to those loans.

For example, the commercial property price index used in the model has a higher proportion of office exposure relative to that of the Bank.

This baseline outlook reflected a worsened economic forecast and related deterioration in the projected commercial property price index used in our CECL model.

The Company made qualitative adjustments to the projected commercial real estate property price index, considering the differences in portfolio collateral composition versus the commercial property price index used in our CECL models.

This resulted in a total provision of $27.9 million for the year ended December 31, 2023, and an overall coverage ratio of 99 basis points.

Management believes the allowance for credit losses allocated to the commercial real estate non-owner occupied portfolio segment accurately represents the estimated inherent losses, factoring in the qualitative adjustment and other assumptions, including the selection of the baseline forecast within the model.

If the Company used the unadjusted baseline outlooks for the commercial property price index over the expected lives of Commercial Real Estate Non-Owner Occupied and Owner-Occupied loan portfolios, the provision would have risen by $6.5 million, leading to an overall coverage ratio of 105 basis points.

The allowance estimation process resulted in a total provision of $83.6 million for the year ended December 31, 2024, and an overall coverage ratio of 104 basis points.

Of the $83.6 million provision for the year, $60.1 million was recorded as part of the Lakeland merger in accordance with GAAP requirements for accounting for business combinations.

Management believes the allowance for credit losses accurately represents the estimated inherent losses, factoring in the qualitative adjustment and other assumptions, including the selection of the baseline forecast within the model.

If the Company used a more severe outlook, the provision would have risen by approximately $16.0 million, leading to an overall coverage ratio of approximately 112 basis points.

Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses.

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The allowance for credit losses on loans individually evaluated for impairment is based upon loans that have been identified through the Company’s normal loan monitoring process.

This process includes the review of delinquent and problem loans at the Company’s Delinquency, Credit, Credit Risk Management and Allowance Committees;

This process includes the review of delinquent and problem loans at the Company’s Credit, Credit Risk Management and Allowance Committees;

or which may be identified through the Company’s loan review process.

Generally, the Company only evaluates loans individually for impairment if the loan is non-accrual, non-homogeneous and the balance is greater than $1.0 million.

In instances where the loan is under $1.0 million, but part of a relationship over $1.0 million, all loans in the relationship would be evaluated individually for impairment.

For all classes of loans deemed collateral-dependent, the Company estimates expected credit losses based on the fair value of the collateral less any selling costs.

If the loan is not collateral dependent, the allowance for credit losses related to individually assessed loans is based on discounted expected cash flows using the loan’s initial effective interest rate.

For loans acquired that have experienced more-than-insignificant deterioration in credit quality since their origination are considered PCD loans.

Loans acquired that have experienced more-than-insignificant deterioration in credit quality since their origination are considered PCD loans.

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

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The CECL approach to calculate the allowance for credit losses on loans is significantly influenced by the composition, characteristics and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecast utilized.

Although management believes that the Company has established and maintained the allowance for credit losses at appropriate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment and economic forecast.

Although management believes that the Company has established and maintained the allowance for credit losses at appropriate

levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment and economic forecast.

Management evaluates its estimates and assumptions on an ongoing basis giving consideration to forecasted economic factors, historical loss experience and other factors.

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

For the year ended December 31, 2023, the increase in provision was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices used in our CECL model.

See Note 5 to the Consolidated Financial Statements for more information on the allowance for credit losses on loans.

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Provision charge (benefit) to operations (2)

83,604 27,900 8,400 (24,300) 29,711

Initial allowance related to PCD loans 17,188 — — — 13,586

Balance at end of period $ 193,432 $ 107,200 $ 88,023 $ 80,740 $ 101,466

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Allowance for credit losses to non-performing loans 268.43 % 215.96 % 150.44 % 168.11 % 116.51 %

(1) On January 1, 2020, the Company adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments,” which replaces the incurred loss methodology with the CECL methodology.

(1) On January 1, 2020, the Company adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments,” which replaced the incurred loss methodology with the CECL methodology.

The adoption of the new standard resulted in the Company recording a $7.9 million increase to the allowance for credit losses.

Additionally, in 2020, 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 in accordance with ASC 326-20.

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 inclusive of the impact of the COVID-19 pandemic and related fiscal and regulatory interventions.

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

Troubled Debt Restructurings and Vintage Disclosures," which addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model.

Troubled Debt Restructurings and Vintage Disclosures," which addresses areas identified by the Financial Accounting Standards Board ("FASB") as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model.

As a result, the Company recorded a $594,000 reduction to the allowance for credit losses.

(2) An initial CECL provision for credit losses on loans of $60.1 million was recorded as part of the Lakeland merger in accordance with GAAP requirements for accounting for business combinations.

Allowance for Credit Losses on Loans by Loan Category.

The following table sets forth the allowance for credit losses by loan category for the periods indicated.

The allowance for credit losses for 2023, 2022, 2021 and 2020 reflected the adoption of the CECL methodology, while the prior year credit losses were based upon the incurred loss methodology.

The following allocation of the allowance for credit losses is based on management’s assessment as of a given point in time.

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Agency and privately-issued CMOs and corporate debt obligations.

Sales of securities may occur from time to time in response to changes in market rates and liquidity needs and to facilitate balance sheet

reallocation to effectively manage interest rate risk.

Sales of securities may occur from time to time in response to changes in market rates and liquidity needs and to facilitate balance sheet reallocation to effectively manage interest rate risk.

Equity securities are traded in active markets with readily accessible quoted market prices, carried at fair value.

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

• Agency-sponsored obligations;

• Government-agency obligations;

• Mortgage-backed securities;

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

The majority of the state and municipal, and corporate obligations carry no lower than "A" ratings from the rating agencies as of December 31, 2023 and the Company had no securities rated BBB or worse by Moody’s Investors Service.

The majority of the state and municipal and corporate obligations carry credit ratings from the rating agencies as of December 31, 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").

CMOs are a type of debt security issued by a special-purpose entity that aggregates pools of mortgages and mortgage-related securities and creates different classes of CMO securities with varying maturities and amortization schedules as well as a residual interest with each class possessing different risk characteristics.

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Management believes these securities may represent attractive alternatives relative to other investments due to the wide variety of maturity, repayment and interest rate options available.

As of December 31, 2023, the Bank held $900,000 in privately issued CMOs in the investment portfolio.

As of December 31, 2024, the Bank held $88.0 million in privately issued securities in the investment portfolio.

The Bank and the Company do not invest in collateralized debt obligations, mortgage-related securities secured by sub-prime loans, or any preferred equity securities.

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Held to Maturity Debt Securities:

Mortgage-backed securities $ — $ — $ — $ — $ 21 $ 21

FHLB-sponsored obligations $ 2,399 $ 2,307 $ 2,399 $ 2,225 $ 2,398 $ 2,127

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Savings accounts, interest and non-interest bearing checking accounts and money market deposit accounts, represented 83.0% of total deposits as of December 31, 2024 and 89.4% of total deposits as of December 31, 2023.

As of December 31, 2023 and 2022, time deposits maturing in less than one year amounted to $1.02 billion and $584.2 million, respectively.

As of December 31, 2024 and 2023, time deposits maturing in less than one year amounted to $3.05 billion and $1.02 billion, respectively.

Our estimated uninsured and uncollateralized deposits at December 31, 2024 totaled $4.42 billion, or 23.7% of deposits.

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government agency obligations or mortgage-related securities.

In March 2023, the Bank established a facility under the Bank Term Funding Program ("BTFP") with the Federal Reserve Bank of New York.

The Bank pledged approximately $521 million in security collateral to the facility improving its access to immediate funding.

Advances under the Program can be requested until March 11, 2024.

As of December 31, 2023, the Company had $450 million of advances under the Program.

We elected to participate in the BTFP program due to significant cost savings compared to other wholesale funding sources.

The funding was used to pay off existing wholesale borrowings.

The ability to prepay at any time without penalty also enhances our ability to manage our interest rate risk position.

As a member of the FHLBNY, the Bank is eligible to obtain advances upon the security of the FHLBNY common stock owned and certain residential mortgage loans, provided certain standards related to creditworthiness have been met.

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Securities sold under agreements to repurchase 2.03 1.69 0.38

FED BTFP Borrowing 4.83 — —

The following table sets forth certain information as to borrowings at the dates indicated.

FED BTFP Borrowing 4.78 4.83 N/A

The following table sets forth certain information as to borrowings, excluding purchase accounting adjustments, at the dates indicated.

As of December 31,

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FED BTFP Borrowing — 450,000 —

Purchase accounting adjustment on borrowed funds 3,714 36 142

Total borrowed funds $ 2,020,435 $ 1,970,033 $ 1,337,370

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Weighted average interest rate of securities sold under agreements to repurchase 2.11 % 2.01 % 0.59 %

Weighted average interest rate of FED BTFP Borrowing 4.83 % — % — %

Weighted average interest rate of FED BTFP Borrowing N/A 4.83 % N/A

Subordinated Debentures.

On May 9, 2024, the Company issued $225.0 million of 9.00% Fixed-to-Floating Rate subordinated notes (the "Notes") due 2034, resulting in net proceeds of $221.2 million.

The Notes bear interest at an initial rate of 9.00% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, commencing on November 15, 2024.

The last interest payment date for the fixed rate period will be May 15, 2029.

From and including May 15, 2029 to, but excluding May 15, 2034 or the date of earlier redemption, the Notes will bear interest at a floating rate per annum equal to the Benchmark rate (which is expected to be three-month term Secured Overnight Financing Rate ("SOFR")), each as defined in and subject to the provisions of the Indenture, plus 476.5 basis points, payable quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, commencing on August 15, 2029.