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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission File Number: 001-31566
PROVIDENT FINANCIAL SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)  
Delaware
42-1547151
(State or Other Jurisdiction of Incorporation or Organization)
(I.R.S. Employer Identification No.)
239 Washington StreetJersey CityNew Jersey07302
(Address of Principal Executive Offices)
(City)(State)
(Zip Code)
(732) 590-9200
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Symbol(s)
Name of each exchange on which registered
Common
PFS
New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    NO  ¨

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding twelve months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  ý    NO  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☒Accelerated Filer☐
Non-Accelerated Filer☐Smaller Reporting Company☐
Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ☐    NO  ý
As of August 1, 2023 there were 83,209,012 shares issued and 75,614,511 shares outstanding of the Registrant’s Common Stock, par value $0.01 per share, including 75,341 shares held by the First Savings Bank Directors’ Deferred Fee Plan not otherwise considered outstanding under U.S. generally accepted accounting principles.
1


PROVIDENT FINANCIAL SERVICES, INC.
INDEX TO FORM 10-Q
 
Item Number
Page Number
1
Consolidated Statements of Financial Condition as of June 30, 2023 (unaudited) and December 31, 2022
Consolidated Statements of Income for the three and six months ended June 30, 2023 and 2022 (unaudited)
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022 (unaudited)
Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)
Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)
2
3
4
1
1A.
2
3
Defaults Upon Senior Securities
4
5
6
Exhibits



2

PART I—FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
June 30, 2023 (Unaudited) and December 31, 2022
(Dollars in Thousands)
 
June 30, 2023December 31, 2022
ASSETS
Cash and due from banks$208,842 $186,490 
Short-term investments30 18 
Total cash and cash equivalents208,872 186,508 
Available for sale debt securities, at fair value1,749,889 1,803,548 
Held to maturity debt securities, net (fair value of $365,029 at June 30, 2023 (unaudited) and $373,468 at December 31, 2022)
378,894 387,923 
Equity securities, at fair value1,238 1,147 
Federal Home Loan Bank stock93,330 68,554 
Loans10,530,531 10,248,883 
Less allowance for credit losses102,073 88,023 
Net loans10,428,458 10,160,860 
Foreclosed assets, net13,697 2,124 
Banking premises and equipment, net70,602 79,794 
Accrued interest receivable53,845 51,903 
Intangible assets459,383 460,892 
Bank-owned life insurance241,107 239,040 
Other assets330,288 341,143 
Total assets$14,029,603 $13,783,436 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand deposits$7,965,529 $8,373,005 
Savings deposits1,275,262 1,438,583 
Certificates of deposit of $100,000 or more666,276 504,627 
Other time deposits354,053 246,809 
Total deposits10,261,120 10,563,024 
Mortgage escrow deposits44,280 35,705 
Borrowed funds1,849,714 1,337,370 
Subordinated debentures10,596 10,493 
Other liabilities221,422 239,141 
Total liabilities12,387,132 12,185,733 
Stockholders’ Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized, none issued
— — 
Common stock, $0.01 par value, 200,000,000 shares authorized, 83,209,012 shares issued and 75,530,425 shares outstanding at June 30, 2023 and 75,169,196 outstanding at December 31, 2022
832 832 
Additional paid-in capital986,150 981,138 
Retained earnings954,403 918,158 
Accumulated other comprehensive (loss) income (162,493)(165,045)
Treasury stock(127,818)(127,154)
Unallocated common stock held by the Employee Stock Ownership Plan(8,603)(10,226)
Common stock acquired by deferred compensation plans(3,150)(3,427)
Deferred compensation plans3,150 3,427 
Total stockholders’ equity1,642,471 1,597,703 
Total liabilities and stockholders’ equity$14,029,603 $13,783,436 
See accompanying notes to unaudited consolidated financial statements.
3


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three and six months ended June 30, 2023 and 2022 (Unaudited)
(Dollars in Thousands, except per share data)
 
Three months ended June 30,Six months ended June 30,
2023202220232022
Interest income:
Real estate secured loans$99,302 $69,073 $195,290 $132,908 
Commercial loans31,426 22,363 60,109 45,184 
Consumer loans4,431 3,344 8,673 6,483 
Available for sale debt securities, equity securities and Federal Home Loan Bank stock11,432 8,454 22,862 16,406 
Held to maturity debt securities2,357 2,489 4,725 5,085 
Deposits, Federal funds sold and other short-term investments948 562 1,793 1,209 
Total interest income149,896 106,285 293,452 207,275 
Interest expense:
Deposits36,447 5,576 63,957 10,763 
Borrowed funds14,088 1,104 21,564 2,272 
Subordinated debt255 130 501 239 
Total interest expense50,790 6,810 86,022 13,274 
Net interest income99,106 99,475 207,430 194,001 
Provision charge (benefit) for credit losses10,397 2,996 16,398 (3,409)
Net interest income after provision charge (benefit) for credit losses88,709 96,479 191,032 197,410 
Non-interest income:
Fees5,775 7,424 12,162 14,313 
Wealth management income6,919 7,024 13,834 14,489 
Insurance agency income3,847 2,850 7,950 6,270 
Bank-owned life insurance1,534 1,563 3,018 2,741 
Net gains on securities transactions29 141 24 157 
Other income1,283 1,930 4,552 3,108 
Total non-interest income19,387 20,932 41,540 41,078 
Non-interest expense:
Compensation and employee benefits35,283 37,437 74,021 74,503 
Net occupancy expense7,949 8,479 16,360 17,810 
Data processing expense5,716 5,632 11,224 10,976 
FDIC insurance2,125 1,350 4,061 2,555 
Amortization of intangibles749 873 1,511 1,732 
Advertising and promotion expense1,379 1,222 2,589 2,326 
Provision (benefit) charge for credit losses on off-balance sheet credit exposures(647)(973)92 (3,363)
Merger-related expenses1,960 — 3,060 — 
Other operating expenses9,949 9,826 21,032 19,191 
Total non-interest expense64,463 63,846 133,950 125,730 
Income before income tax expense43,633 53,565 98,622 112,758 
Income tax expense11,630 14,337 26,083 29,567 
Net income$32,003 $39,228 $72,539 $83,191 
Basic earnings per share$0.43 $0.53 $0.97 $1.11 
Weighted average basic shares outstanding74,823,272 74,328,632 74,734,795 75,068,154 
Diluted earnings per share$0.43 $0.53 $0.97 $1.11 
Weighted average diluted shares outstanding74,830,187 74,400,788 74,766,848 75,152,286 

See accompanying notes to unaudited consolidated financial statements.
4


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
Three and six months ended June 30, 2023 and 2022 (Unaudited)
(Dollars in Thousands)
 
Three months ended June 30,Six months ended June 30,
2023202220232022
Net income$32,003 $39,228 $72,539 $83,191 
Other comprehensive income (loss), net of tax:
Unrealized gains and losses on available for sale debt securities:
Net unrealized (losses) gains arising during the period(14,726)(45,733)6,138 (130,704)
Reclassification adjustment for gains included in net income— (42)— (42)
Total(14,726)(45,775)6,138 (130,746)
Unrealized gains and losses on derivatives:
Net unrealized gains arising during the period3,650 2,276 3,033 12,227 
Reclassification adjustment for (gains) losses included in net income(3,010)(118)(6,089)369 
Total640 2,158 (3,056)12,596 
Amortization related to post-retirement obligations(261)(236)(530)(512)
Total other comprehensive (loss) income(14,347)(43,853)2,552 (118,662)
Total comprehensive income (loss)$17,656 $(4,625)$75,091 $(35,471)

See accompanying notes to unaudited consolidated financial statements.

5


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders’ Equity
For the three and six months ended June 30, 2022 (Unaudited)
(Dollars in Thousands)
For the three months ended June 30, 2022
COMMON STOCKADDITIONAL PAID-IN CAPITALRETAINED EARNINGSACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOMETREASURYSTOCKUNALLOCATED ESOP SHARESCOMMON STOCK ACQUIRED BY DEFERRED COMP PLANSDEFERRED COMPENSATION PLANSTOTAL STOCKHOLDERS’ EQUITY
Balance at March 31, 2022$832 $972,552 $839,807 $(67,946)$(109,581)$(14,533)$(3,844)$3,844 $1,621,131 
Net income— — 39,228 — — — — — 39,228 
Other comprehensive loss, net of tax— — — (43,853)— — — — (43,853)
Cash dividends paid— — (18,058)— — — — — (18,058)
Distributions from deferred comp plans— 41 — — — — 139 (139)41 
Purchases of treasury stock— — — — (17,505)— — — (17,505)
Purchase of employee restricted shares to fund statutory tax withholding— — — — (5)— — — (5)
Allocation of ESOP shares— 250 — — — 812 — — 1,062 
Allocation of Stock Award Plan ("SAP") shares— 3,174 — — — — — — 3,174 
Allocation of stock options— 50 — — — — — — 50 
Balance at June 30, 2022$832 $976,067 $860,977 $(111,799)$(127,091)$(13,721)$(3,705)$3,705 $1,585,265 

For the six months ended June 30, 2022
COMMONSTOCKADDITIONAL
PAID-IN CAPITAL		RETAINEDEARNINGSACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)TREASURYSTOCKUNALLOCATED
 ESOP SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANSDEFERRED COMPENSATION PLANSTOTAL
STOCKHOLDERS’ EQUITY
Balance at December 31, 2021$832 $969,815 $814,533 $6,863 $(79,603)$(15,344)$(3,984)$3,984 $1,697,096 
Net income— — 83,191 — — — — — 83,191 
Other comprehensive loss, net of tax— — — (118,662)— — — — (118,662)
Cash dividends paid— — (36,747)— — — — — (36,747)
Distributions from deferred comp plans— 86 — — — — 279 (279)86 
Purchases of treasury stock— — — — (46,530)— — — (46,530)
Purchase of employee restricted shares to fund statutory tax withholding— — — — (958)— — — (958)
Stock option exercises— — — — — — — — — 
Allocation of ESOP shares— 582 — — — 1,623 — — 2,205 
Allocation of SAP shares— 5,485 — — — — — — 5,485 
Allocation of stock options— 99 — — — — — — 99 
Balance at June 30, 2022$832 $976,067 $860,977 $(111,799)$(127,091)$(13,721)$(3,705)$3,705 $1,585,265 

See accompanying notes to unaudited consolidated financial statements.









6


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders’ Equity
For the three and six months ended June 30, 2023 (Unaudited)
(Dollars in Thousands)
For the three months ended June 30, 2023
COMMON STOCKADDITIONAL PAID-IN CAPITALRETAINED EARNINGSACCUMULATED OTHER COMPREHENSIVE LOSSTREASURY STOCKUNALLOCATED ESOP SHARESCOMMON STOCK ACQUIRED BY DEFERRED COMP PLANSDEFERRED COMPENSATION PLANSTOTAL STOCKHOLDERS’ EQUITY
Balance at March 31, 2023832 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 SAP shares— 1,997 — — — — — — 1,997 
Allocation of stock options— 33 — — — — — — 33 
Balance at June 30, 2023$832 $986,150 $954,403 $(162,493)$(127,818)$(8,603)$(3,150)$3,150 $1,642,471 
For the six months ended June 30, 2023
COMMONSTOCKADDITIONAL
PAID-IN
CAPITAL		RETAINED EARNINGSACCUMULATED
OTHER
COMPREHENSIVE
LOSS		TREASURY
STOCK		UNALLOCATED
ESOP
SHARES		COMMON STOCK ACQUIRED BY DEFERRED COMP PLANSDEFERRED COMPENSATION PLANSTOTAL STOCKHOLDERS’ EQUITY
Balance at December 31, 2022$832 $981,138 $918,158 $(165,045)$(127,154)$(10,226)$(3,427)$3,427 $1,597,703 
Net income— — 72,539 — — — — — 72,539 
Other comprehensive income, net of tax— — — 2,552 — — — — 2,552 
Cash dividends paid— — (36,727)— — — — — (36,727)
Cumulative effect of adopting Accounting Standards Update ("ASU") No. 2022-02, net of tax— — 433 — — — — — 433 
Distributions from deferred comp plans— 79 — — — — 277 (277)79 
Purchase of employee restricted shares to fund statutory tax withholding— — — — (1,671)— — — (1,671)
Stock option exercises— (217)— — 1,007 — — — 790 
Allocation of ESOP shares— 243 — — — 1,623 — — 1,866 
Allocation of SAP shares— 4,830 — — — — — — 4,830 
Allocation of stock options— 77 — — — — — — 77 
Balance at June 30, 2023$832 $986,150 $954,403 $(162,493)$(127,818)$(8,603)$(3,150)$3,150 $1,642,471 

See accompanying notes to unaudited consolidated financial statements.
7


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six months ended June 30, 2023 and 2022 (Unaudited)
(Dollars in Thousands)
 
Six months ended June 30,
20232022
Cash flows from operating activities:
Net income$72,539 $83,191 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles5,953 6,579 
Provision charge (benefit) for credit losses on loans and securities16,398 (3,409)
Provision charge (benefit) for credit losses on off-balance sheet credit exposures92 (3,363)
Deferred tax (benefit) expense(2,332)3,393 
Amortization of operating lease right-of-use assets5,257 5,393 
Income on Bank-owned life insurance(3,018)(2,741)
Net amortization of premiums and discounts on securities4,012 7,665 
Accretion of net deferred loan fees(4,691)(4,801)
Amortization of premiums on purchased loans, net120 154 
Originations of loans held for sale(11,490)(16,197)
Proceeds from sales of loans originated for sale11,938 9,881 
ESOP expense1,866 2,205 
Allocation of stock award expense4,830 5,485 
Allocation of stock option expense77 99 
Net gain on sale of loans (972)(824)
Net gain on securities transactions(24)(157)
Net gain on sale of premises and equipment(197)(22)
Net gain on sale of foreclosed assets(2,789)(16)
Increase in accrued interest receivable(1,942)(868)
Decrease (increase) in other assets7,490 (12,691)
(Decrease) increase in other liabilities(17,719)22,578 
Net cash provided by operating activities85,398 101,534 
Cash flows from investing activities:
Net increase in loans(285,500)(396,236)
Purchases of loans(3,394)(3,422)
Proceeds from sales of foreclosed assets3,485 280 
Proceeds from maturities, calls and paydowns of held to maturity debt securities17,545 37,009 
Purchases of investment securities held to maturity(9,130)(12,369)
Proceeds from maturities, calls and paydowns of available for sale debt securities92,681 166,855 
Purchases of available for sale debt securities(34,802)(241,725)
Proceeds from redemption of Federal Home Loan Bank stock112,279 31,134 
Purchases of Federal Home Loan Bank stock(137,055)(51,680)
BOLI claim benefits received2,347 — 
Proceeds from sales of premises and equipment62 22 
Purchases of premises and equipment(2,959)(5,944)
Net cash used in investing activities(244,441)(476,076)
Cash flows from financing activities:
Net decrease in deposits(301,904)(359,788)
Increase in mortgage escrow deposits8,575 7,906 
Cash dividends paid to stockholders(36,727)(36,747)
8

Six months ended June 30,
20232022
Purchase of treasury stock— (46,530)
Purchase of employee restricted shares to fund statutory tax withholding(1,671)(958)
Stock options exercised790 — 
Proceeds from long-term borrowings446,531 964,000 
Payments on long-term borrowings(32,500)(579,111)
Net increase (decrease) in short-term borrowings98,313 (9,161)
Net cash provided by (used in) financing activities181,407 (60,389)
Net increase (decrease) in cash and cash equivalents22,364 (434,931)
Cash and cash equivalents at beginning of period186,438 685,163 
Restricted cash at beginning of period70 27,300 
Total cash, cash equivalents and restricted cash at beginning of period186,508 712,463 
Cash and cash equivalents at end of period208,802 277,462 
Restricted cash at end of period70 70 
Total cash, cash equivalents and restricted cash at end of period$208,872 $277,532 
Cash paid during the period for:
Interest on deposits and borrowings$81,490 $14,308 
Income taxes$26,591 $7,760 
Non-cash investing activities:
Transfer of loans receivable to foreclosed assets$12,341 $624 
See accompanying notes to unaudited consolidated financial statements.
9


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
A. Basis of Financial Statement Presentation
The accompanying unaudited consolidated financial statements include the accounts of Provident Financial Services, Inc. (the "Company") and its wholly owned subsidiary, Provident Bank (the “Bank") and its wholly owned subsidiaries.
In preparing the interim unaudited consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of financial condition and the consolidated statements of income for the periods presented. Actual results could differ from these estimates. The allowance for credit losses is a material estimate that is particularly susceptible to near-term change.
The interim unaudited consolidated financial statements reflect all normal and recurring adjustments, which are, in the opinion of management, considered necessary for a fair presentation of the financial condition and results of operations for the periods presented. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations that may be expected for all of 2023.
Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission.
These unaudited consolidated financial statements should be read in conjunction with the December 31, 2022 Annual Report to Stockholders on Form 10-K.
B. Earnings Per Share
The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share calculations for the three and six months ended June 30, 2023 and 2022 (dollars in thousands, except per share amounts):
Three months ended June 30,
20232022
Net
Income		Weighted
Average
Common
Shares
Outstanding		Per
Share
Amount 		Net
Income		Weighted
Average
Common
Shares
Outstanding 		Per
Share
Amount
Net income$32,003 $39,228 
Basic earnings per share:
Income available to common stockholders$32,003 74,823,272 $0.43 $39,228 74,328,632 $0.53 
Dilutive shares6,915 72,156 
Diluted earnings per share:
Income available to common stockholders$32,003 74,830,187 $0.43 $39,228 74,400,788 $0.53 
10

Six months ended June 30,
20232022
Net
Income		Weighted
Average
Common
Shares
Outstanding		Per
Share
Amount		Net
Income		Weighted
Average
Common Shares Outstanding		Per
Share
Amount
Net income$72,539 $83,191 
Basic earnings per share:
Income available to common stockholders$72,539 74,734,795 $0.97 $83,191 75,068,154 $1.11 
Dilutive shares32,053 84,132 
Diluted earnings per share:
Income available to common stockholders$72,539 74,766,848 $0.97 $83,191 75,152,286 $1.11 
Anti-dilutive stock options and awards at June 30, 2023 and 2022, totaling 1.3 million shares and 1.0 million shares, respectively, were excluded from the earnings per share calculations.
C. Loans Receivable and Allowance for Credit Losses
The impact of utilizing the current expected credit loss ("CECL") methodology approach to calculate the allowance for credit losses on loans is significantly influenced by the composition, characteristics and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecast utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility to the Company’s reported earnings. For the three and six months ended June 30, 2023, a worsened economic forecast and related deterioration in the projected commercial property price indices over the expected life of the loan portfolio within our CECL model led to increases to the provisions for credit losses and off-balance sheet credit exposures. See Notes 4 and 9 to the Consolidated Financial Statements for more information on the allowance for credit losses on loans and off-balance sheet credit exposures.
D. Goodwill
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 is analyzed for impairment once a year. As permitted by GAAP, the Company prepares a qualitative assessment in determining whether goodwill may be impaired. The factors considered in the assessment include macroeconomic conditions, industry and market conditions and overall financial performance of the Company, among others. The Company completed its most recent annual goodwill impairment test as of July 1, 2023. At June 30, 2023, the Company performed an interim goodwill impairment analysis and concluded that no triggering considerations were met and therefore a test for impairment between annual tests was not required.
Note 2. Business Combinations
Lakeland Bancorp, Inc. - Merger Agreement
On September 26, 2022, the Company entered into a definitive merger agreement pursuant to which it will merge (the “merger”) with Lakeland Bancorp, Inc. ("Lakeland"), and Lakeland Bank, a wholly owned subsidiary of Lakeland, will merge with and into Provident Bank, a wholly owned subsidiary of the Company. The merger agreement has been unanimously approved by the boards of both companies and shareholder approval has also been received for both companies. The actual value of the Company’s common stock to be recorded as consideration in the merger will be based on the closing price of Company’s common stock at the time of the merger completion date. Under the merger agreement, each share of Lakeland common stock will be exchanged for 0.8319 shares of the Company's common stock plus cash in lieu of fractional shares.
Note 3. Investment Securities
At June 30, 2023, the Company had $1.75 billion and $378.9 million in available for sale debt securities and held to maturity debt securities, respectively. Many factors, including lack of liquidity in the secondary market for certain securities, variations in pricing information, changes in interest rates, regulatory actions, changes in the business environment or any changes in the
11

competitive marketplace could have an adverse effect on the Company’s investment portfolio. The total number of available for sale and held to maturity debt securities in an unrealized loss position at June 30, 2023 totaled 937, compared with 914 at December 31, 2022. The increase in the number of securities in an unrealized loss position at June 30, 2023 was due to higher current market interest rates compared to rates at December 31, 2022.
Available for Sale Debt Securities
The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the fair value for available for sale debt securities at June 30, 2023 and December 31, 2022 (in thousands):
June 30, 2023
Amortized
cost		Gross
unrealized
gains		Gross
unrealized
losses		Fair
value
U.S. Treasury obligations$276,106 — (29,039)247,067 
Agency obligations31,452 301 — 31,753 
Mortgage-backed securities1,549,842 84 (203,202)1,346,724 
Asset-backed securities34,351 379 (224)34,506 
State and municipal obligations64,939 — (9,214)55,725 
Corporate obligations40,495 — (6,381)34,114 
$1,997,185 764 (248,060)1,749,889 
December 31, 2022
Amortized
cost		Gross
unrealized
gains		Gross
unrealized
losses		Fair
value
U.S. Treasury obligations$275,620 — (29,804)245,816 
Mortgage-backed securities1,636,913 209 (209,983)1,427,139 
Asset-backed securities37,706 278 (363)37,621 
State and municipal obligations67,706 — (10,842)56,864 
Corporate obligations40,540 50 (4,482)36,108 
$2,058,485 537 (255,474)1,803,548 
The amortized cost and fair value of available for sale debt securities at June 30, 2023, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.
June 30, 2023
Amortized
cost		Fair
value
Due in one year or less$— — 
Due after one year through five years242,910 218,600 
Due after five years through ten years82,226 70,318 
Due after ten years56,404 47,988 
$381,540 336,906 
Investments which pay principal on a periodic basis totaling $1.62 billion at amortized cost and $1.41 billion at fair value are excluded from the table above as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.
There were no sales of securities from the available for sale debt securities portfolio for the three and six months ended June 30, 2023 and 2022. For the three and six months ended June 30, 2023, there were no proceeds from calls on securities in the available for sale debt securities portfolio. For the three and six months ended June 30, 2022, proceeds from calls on securities in the available for sale debt securities portfolio totaled $5.4 million with gains of $58,000 and no losses recognized.
12

The number of available for sale debt securities in an unrealized loss position at June 30, 2023 totaled 464, compared with 475 at December 31, 2022. The decline in the number of securities in an unrealized loss position at June 30, 2023 was due to maturities and calls of securities in the quarter. All securities in an unrealized loss position were investment grade at June 30, 2023.
Held to Maturity Debt Securities
The following tables present the amortized cost, gross unrealized gains, gross unrealized losses and the estimated fair value for held to maturity debt securities at June 30, 2023 and December 31, 2022 (in thousands):
June 30, 2023
Amortized
cost		Gross
unrealized
gains 		Gross
unrealized
losses 		Fair
value
Agency obligations$12,096 — (929)11,167 
State and municipal obligations357,003 168 (12,510)344,661 
Corporate obligations9,820 — (619)9,201 
$378,919 168 (14,058)365,029 
December 31, 2022
Amortized
cost		Gross
unrealized
gains 		Gross
unrealized
losses 		Fair
value
Agency obligations$9,997 — (1,033)8,964 
State and municipal obligations366,164 268 (13,015)353,417 
Corporate obligations11,789 1 (703)11,087 
$387,950 269 (14,751)373,468 
The Company generally purchases securities for long-term investment purposes, and differences between amortized cost and fair value may fluctuate during the investment period. There were no sales of securities from the held to maturity debt securities portfolio for the three and six months ended June 30, 2023 and 2022. For the three and six months ended June 30, 2023, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $3.5 million and $6.6 million, respectively. As to these calls on securities, for the three months ended June 30, 2023, there were gross gains of $28,000 and no gross losses, while for the six months ended June 30, 2023, gross gains totaled $24,000, with no gross losses. For the three and six months ended June 30, 2022, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $10.3 million and $26.2 million, respectively. As to these calls on securities for the three and six months ended June 30, 2022, gross gains totaled $83,000 and $99,000, respectively, with no gross losses.
The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio at June 30, 2023 by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.
June 30, 2023
Amortized
cost		Fair
value
Due in one year or less$25,283 25,199 
Due after one year through five years169,684 166,605 
Due after five years through ten years153,491 148,121 
Due after ten years30,461 25,104 
$378,919 365,029 
The allowance for credit losses on held to maturity debt securities at June 30, 2023 and December 31, 2022 was $25,000 and $27,000, respectively, and are excluded from amortized cost in the tables above.
The number of held to maturity debt securities in an unrealized loss position at June 30, 2023 totaled 473, compared with 439 at December 31, 2022. The increase in the number of securities in an unrealized loss position at June 30, 2023, was due to higher current market interest rates compared to rates at December 31, 2022.
Management measures expected credit losses on held to maturity debt securities on a collective basis by security type. Management classifies the held to maturity debt securities portfolio into the following security types:
13

•Agency obligations;
•Mortgage-backed securities;
•State and municipal obligations; and
•Corporate obligations.

All of the agency obligations held by the Company are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies and have a long history of no credit losses. The majority of the state and municipal and corporate obligations carry credit ratings from the rating agencies at June 30, 2023 no lower than A and the Company had no securities rated BBB or worse by Moody’s Investors Service.
Credit Quality Indicators. The following table provides the amortized cost of held to maturity debt securities by credit rating at June 30, 2023 and December 31, 2021 (in thousands):
June 30, 2023
Total PortfolioAAAAAABBBNot RatedTotal
Agency obligations$12,096 — — — — 12,096 
State and municipal obligations47,125 166,596 142,830 — 452 357,003 
Corporate obligations505 2,073 6,146 — 1,096 9,820 
$59,726 168,669 148,976 — 1,548 378,919 
December 31, 2022
Total PortfolioAAAAAABBBNot RatedTotal
Agency obligations$9,997 — — — — 9,997 
State and municipal obligations48,453 171,934 143,829 770 1,178 366,164 
Corporate obligations507 3,592 7,415 — 275 11,789 
$58,957 175,526 151,244 770 1,453 387,950 
Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. At June 30, 2023, the held to maturity debt securities portfolio was comprised of 16% rated AAA, 45% rated AA, 39% rated A, and less than 1% either below an A rating or not rated by Moody’s Investors Service or Standard and Poor’s. Securities not explicitly rated, such as U.S. Government mortgage-backed securities, were grouped where possible under the credit rating of the issuer of the security.


14

Note 4. Loans Receivable and Allowance for Credit Losses
Loans receivable at June 30, 2023 and December 31, 2022 are summarized as follows (in thousands):
June 30, 2023December 31, 2022
Mortgage loans:
Commercial$4,373,436 4,316,185 
Multi-family1,645,770 1,513,818 
Construction707,234 715,494 
Residential1,166,159 1,177,698 
Total mortgage loans7,892,599 7,723,195 
Commercial loans2,348,447 2,233,670 
Consumer loans301,306 304,780 
Total gross loans10,542,352 10,261,645 
Premiums on purchased loans1,374 1,380 
Net deferred fees(13,195)(14,142)
Total loans$10,530,531 10,248,883 
The following tables summarize the aging of loans receivable by portfolio segment and class of loans (in thousands):
June 30, 2023
30-59 Days60-89 DaysNon-accrualRecorded
Investment
> 90 days
accruing		Total Past
Due 		CurrentTotal Loans
Receivable		Non-accrual loans with no related allowance
Mortgage loans:
Commercial$1,445 1,137 7,279 — 9,861 4,363,575 4,373,436 4,276 
Multi-family3,853 — 2,314 — 6,167 1,639,603 1,645,770 2,314 
Construction— — 1,874 — 1,874 705,360 707,234 1,874 
Residential1,427 1,171 1,698 — 4,296 1,161,863 1,166,159 1,698 
Total mortgage loans6,725 2,308 13,165 — 22,198 7,870,401 7,892,599 10,162 
Commercial loans3,021 90 31,885 — 34,996 2,313,451 2,348,447 19,504 
Consumer loans957 147 878 — 1,982 299,324 301,306 878 
Total gross loans$10,703 2,545 45,928 — 59,176 10,483,176 10,542,352 30,544 
December 31, 2022
30-59 Days60-89 DaysNon-accrualRecorded
Investment
> 90 days
accruing		Total Past
Due 		CurrentTotal Loans ReceivableNon-accrual loans with no related allowance
Mortgage loans:
Commercial$2,300 412 28,212 — 30,924 4,285,261 4,316,185 22,961 
Multi-family790 — 1,565 — 2,355 1,511,463 1,513,818 1,565 
Construction905 1,097 1,878 — 3,880 711,614 715,494 1,878 
Residential1,411 1,114 1,928 — 4,453 1,173,245 1,177,698 1,928 
Total mortgage loans5,406 2,623 33,583 — 41,612 7,681,583 7,723,195 28,332 
Commercial loans964 1,014 24,188 — 26,166 2,207,504 2,233,670 21,156 
Consumer loans885 147 738 — 1,770 303,010 304,780 739 
Total gross loans$7,255 3,784 58,509 — 69,548 10,192,097 10,261,645 50,227 
Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The principal amounts of these non-accrual loans were $45.9 million and $58.5 million at June 30, 2023 and December 31, 2022, respectively. Included in non-accrual loans were $17.4 million and $42.9 million of loans which were less than 90 days past due at June 30, 2023 and December 31, 2022, respectively. There were no loans 90 days or greater past due and still accruing interest at June 30, 2023 and December 31, 2022.
15

The activity in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):
Three months ended June 30,Mortgage loansCommercial loansConsumer loansTotal
2023
Balance at beginning of period$63,195 27,117 2,446 92,758 
Provision charge (benefit) to operations6,742 3,769 (111)10,400 
Recoveries of loans previously charged-off3 134 173 310 
Loans charged-off— (1,313)(82)(1,395)
Balance at end of period$69,940 29,707 2,426 102,073 
2022
Balance at beginning of period$50,096 23,799 2,380 76,275 
Provision charge (benefit) to operations5,593 (2,710)117 3,000 
Recoveries of loans previously charged-off361 443 109 913 
Loans charged-off(986)(145)(41)(1,172)
Balance at end of period$55,064 21,387 2,565 79,016 
Six months ended June 30,Mortgage loansCommercial loansConsumer loansTotal
2023
Balance at beginning of period$58,218 27,413 2,392 88,023 
Cumulative effect of adopting Accounting Standards Update ("ASU") No. 2022-02(510)(43)(41)(594)
Provision charge (benefit) to operations12,954 3,461 (15)16,400 
Recoveries of loans previously charged-off6 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 
2022
Balance at beginning of period$52,104 26,343 2,293 80,740 
Provision charge (benefit) charge to operations3,599 (7,115)116 (3,400)
Recoveries of loans previously charged-off371 2,304 275 2,950 
Loans charged-off(1,010)(145)(119)(1,274)
Balance at end of period$55,064 21,387 2,565 79,016 
For the three and six months ended June 30, 2023, the Company recorded a $10.4 million and a $16.4 million provision for credit losses on loans, respectively. The increase in provision was attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices over the expected life of the loan portfolio within our CECL model.






16

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):
20232022202120202019Prior to 2019Total 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 $75,000, which is not included in the table above.
The following table summarizes the Company's gross charge-offs recorded during the six months ended June 30, 2023 by year of origination (in thousands):
20232022202120202019Prior to 2019Total Loans
Mortgage loans:
Commercial$— — — — — 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. At June 30, 2023, there were 17 loans totaling $37.1 million, compared to 10 loans totaling $42.8 million at December 31, 2022, that were individually evaluated for impairment.
A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans deemed collateral-dependent, the Company estimates expected credit losses based on the collateral’s fair value less any selling costs. A specific allocation of the allowance for credit losses is established for each collateral-dependent loan with a carrying balance greater than the collateral’s fair value, less estimated selling costs. In most cases, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less estimated selling costs. The Company uses third-party appraisals to determine the fair value of the underlying collateral in its analysis of collateral-dependent loans. A third-party appraisal is generally ordered as soon as a loan is designated as a collateral-dependent loan and updated annually, or more frequently if required. At each fiscal quarter end, if a loan is designated as collateral-dependent and the third-party appraisal has not yet been received, an evaluation of all available collateral is made using the best information available at the time, including rent rolls, borrower financial statements and tax returns, prior appraisals, management’s knowledge of the market and collateral, and internally prepared collateral valuations based upon market assumptions regarding vacancy and capitalization rates, each as and where applicable. Once the appraisal is received and reviewed, the specific reserves are adjusted to reflect the appraised value and evaluated for charge offs. The Company believes there have been no significant time lapses resulting from this process.
At June 30, 2023 and December 31, 2022, the Company had $14.6 million and $24.0 million related to the fair value of collateral-dependent loans individually evaluated for impairment, respectively. These loans at June 30, 2023 consisted of $14.6 million in commercial loans.
Loan modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearance, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. In addition, management attempts to obtain additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue
17

interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.
The following illustrates the most common loan modifications by loan classes offered by the Company that are required to be disclosed pursuant to the requirements of ASU 2022-02:
Loan ClassesModification types
CommercialTerm extension, interest rate reductions, payment delay, or combination thereof. These modifications extend the term of the loan, lower the payment amount, or otherwise delay payments during a defined period for the purpose of providing borrowers additional time to return to compliance with the original loan term.
Residential Mortgage/ Home EquityForbearance period greater than six months. These modifications require reduced or no payments during the forbearance period for the purpose of providing borrowers additional time to return to compliance with the original loan term. As well as, term extension and rate adjustment. These modifications extend the term of the loan and provides for an adjustment to the interest rate, which reduces the monthly payment requirement.
Automobile/ Direct InstallmentTerm extension greater than three months. These modifications extend the term of the loan, which reduces the monthly payment requirement.
Effective January 1, 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for troubled debt restructurings (“TDRs”) while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a modified retrospective basis. Upon adoption of this guidance, the Company no longer establishes a specific reserve for loan modifications to borrowers experiencing financial difficulty. Instead, these loan modifications are included in their respective pool and a historical loss rate is applied to the current loan balance to arrive at the quantitative and qualitative baseline portion of the allowance for credit losses. 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.
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 ExtensionInterest Rate ReductionInterest 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 six months ended June 30, 2023 (in thousands):
Weighted-Average Months of Term ExtensionWeight-Average Rate Change
Commercial loans100.28 %
Total gross loans100.28 %
There were no loan modifications made to borrowers experiencing financial difficulty during the three or six months ended June 30, 2023, that subsequently defaulted.
18

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):
Current30-59 Days Past Due60-89 Days Past Due90 days or more Past DueNon- AccrualTotal
Commercial loans$5,021 — — — — 5,021 
Total gross loans$5,021 — — — — 5,021 
Prior to our adoption of ASU 2022-02, we accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. However, our TDR accounting described herein was suspended for most of our loss mitigation activities through our election to account for certain eligible loss mitigation activities occurring between March 2020 and January 1, 2022 under the COVID-19 relief granted pursuant to the CARES Act and the Consolidated Appropriations Act of 2021. Effective January 1, 2023, we adopted ASU 2022-02, which eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023.
The following table presents the number of loans modified as TDRs during the three and six months ended June 30, 2022, along with their balances immediately prior to the modification date and post-modification as of June 30, 2022 (in thousands):
For the three and six months ended
June 30, 2022
Troubled Debt RestructuringsNumber of
Loans		Pre-Modification
Outstanding
Recorded 
Investment		Post-Modification
Outstanding
Recorded Investment
Mortgage loans:
Residential2 $265 206 
Multi Family1 1,618 1,601 
Total mortgage loans3 1,883 1,807 
Commercial loans2 378 274 
Total restructured loans5 $2,261 2,081 
During the three and six months ended June 30, 2022, $921,000 of charge-offs were recorded on collateral-dependent impaired loans. There was one loan totaling $209,000 which had a payment default (90 days or more past due) for a loan modified as a TDR within the 12 month period ending June 30, 2023. For TDRs that subsequently defaulted, the Company determined the amount of the allowance for the respective loans in accordance with the accounting policy for the allowance for credit losses on loans individually evaluated for impairment.
As allowed by CECL, loans acquired by the Company that experience more-than-insignificant deterioration in credit quality after origination, are classified as Purchased Credit Deteriorated ("PCD") loans. At June 30, 2023, the balance of PCD loans totaled $173.3 million with a related allowance for credit losses of $1.6 million. The balance of PCD loans at December 31, 2022 was $193.0 million with a related allowance for credit losses of $1.7 million.
Management utilizes an internal nine-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (watch) or 6 (special mention). Loans with adverse classifications (substandard, doubtful or loss) are rated 7, 8 or 9, respectively. Commercial mortgage, commercial, multi-family and construction loans are rated individually, and each lending officer is responsible for risk rating loans in their portfolio. These risk ratings are then reviewed by the department manager and/or the Chief Lending Officer and by the Credit Department. The risk ratings are also reviewed periodically through loan review examinations which are currently performed by an independent third-party. Reports by the independent third-party are presented to the Audit Committee of the Board of Directors.
The Company participated in the Paycheck Protection Program (“PPP”) through the United States Department of the Treasury and Small Business Administration. PPP loans were fully guaranteed by the SBA and were eligible for forgiveness by the SBA to the extent that the proceeds were used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up
19

to 24 weeks after the loan was made as long as certain conditions were met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA are to be repaid by the SBA to the Company. Eligibility ended for this program in May of 2021. PPP loans are included in our commercial loan portfolio. Under the PPP, the Company secured 2,067 PPP loans for its customers totaling $682.0 million. As of June 30, 2023, 2,054 PPP loans totaling $679.4 million were forgiven and repaid by the SBA. The balance of PPP loans at June 30, 2023 was $2.6 million.
The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades as of June 30, 2023 and December 31, 2022 (in thousands):
Gross Loans Held for Investment by Year of Origination
at June 30, 2023
20232022202120202019Prior to 2019Revolving LoansRevolving loans to term loansTotal Loans
Commercial Mortgage
Special mention$— — — 2,713 2,346 33,436 485 — 38,980 
Substandard — — — 376 — 7,785 434 — 8,595 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — 3,089 2,346 41,221 919 — 47,575 
Pass/Watch290,713 910,869 670,781 511,239 513,150 1,318,607 96,163 14,339 4,325,861 
Total commercial mortgage$290,713 910,869 670,781 514,328 515,496 1,359,828 97,082 14,339 4,373,436 
Multi-family
Special mention$— — — — — 9,608 — — 9,608 
Substandard— — — — — 3,211 — — 3,211 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — — — 12,819 — — 12,819 
Pass/Watch132,991 170,856 198,427 279,117 232,748 614,456 3,223 1,133 1,632,951 
Total multi-family$132,991 170,856 198,427 279,117 232,748 627,275 3,223 1,133 1,645,770 
Construction
Special mention$— — — — — — — — — 
Substandard— — — — 1,097 777 — — 1,874 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — — 1,097 777 — — 1,874 
Pass/Watch33,795 276,155 266,520 105,078 8,456 13,346 2,010 705,360 
Total construction$33,795 276,155 266,520 105,078 9,553 14,123 — 2,010 707,234 
Residential (1)
Special mention$— — — — — 1,172 — — 1,172 
Substandard— — — — — 2,142 — — 2,142 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — — — 3,314 — — 3,314 
Pass/Watch42,524 147,449 205,949 205,123 92,537 469,263 — — 1,162,845 
Total residential$42,524 147,449 205,949 205,123 92,537 472,577 — — 1,166,159 
20

Gross Loans Held for Investment by Year of Origination
at June 30, 2023
20232022202120202019Prior to 2019Revolving LoansRevolving loans to term loansTotal Loans
Total Mortgage
Special mention$— — — 2,713 2,346 44,216 485 — 49,760 
Substandard— — — 376 1,097 13,915 434 — 15,822 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — 3,089 3,443 58,131 919 — 65,582 
Pass/Watch500,023 1,505,329 1,341,677 1,100,557 846,891 2,415,672 99,386 17,482 7,827,017 
Total Mortgage$500,023 1,505,329 1,341,677 1,103,646 850,334 2,473,803 100,305 17,482 7,892,599 
Commercial
Special mention$— 70 387 577 54 11,490 9,714 — 22,292 
Substandard— — 14,966 17,133 3,974 14,473 13,837 352 64,735 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— 70 15,353 17,710 4,028 25,963 23,551 352 87,027 
Pass/Watch154,852 379,855 308,290 148,648 151,902 552,747 538,651 26,475 2,261,420 
Total commercial$154,852 379,925 323,643 166,358 155,930 578,710 562,202 26,827 2,348,447 
Consumer (1)
Special mention$— — — — — 145 — 2 147 
Substandard— — — — — 4 709 90 803 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — — — 149 709 92 950 
Pass/Watch14,243 29,064 19,513 3,328 15,341 93,900 112,425 12,542 300,356 
Total consumer$14,243 29,064 19,513 3,328 15,341 94,049 113,134 12,634 301,306 
Total Loans
Special mention$— 70 387 3,290 2,400 55,851 10,199 2 72,199 
Substandard— — 14,966 17,509 5,071 28,392 14,980 442 81,360 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— 70 15,353 20,799 7,471 84,243 25,179 444 153,559 
Pass/Watch669,118 1,914,248 1,669,480 1,252,533 1,014,134 3,062,319 750,462 56,499 10,388,793 
Total gross loans$669,118 1,914,318 1,684,833 1,273,332 1,021,605 3,146,562 775,641 56,943 10,542,352 
(1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan.

Gross Loans Held for Investment by Year of Origination
at December 31, 2022
20222021202020192018Prior to 2018Revolving LoansRevolving loans to term loansTotal Loans
Commercial Mortgage
Special mention$— — 3,071 26,809 52,509 14,740 — — 97,129 
21

Gross Loans Held for Investment by Year of Origination
at December 31, 2022
20222021202020192018Prior to 2018Revolving LoansRevolving loans to term loansTotal Loans
Substandard— — — — 18,020 11,774 434 — 30,228 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — 3,071 26,809 70,529 26,514 434 — 127,357 
Pass/Watch951,367 630,584 567,448 546,474 218,620 1,164,854 94,716 14,765 4,188,828 
Total commercial mortgage$951,367 630,584 570,519 573,283 289,149 1,191,368 95,150 14,765 4,316,185 
Multi-family
Special mention$— — — — — 9,730 — — 9,730 
Substandard— — — — — 2,356 — — 2,356 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — — — 12,086 — — 12,086 
Pass/Watch142,550 150,293 282,228 234,953 187,499 502,177 887 1,145 1,501,732 
Total multi-family$142,550 150,293 282,228 234,953 187,499 514,263 887 1,145 1,513,818 
Construction
Special mention$— — — — 19,728 905 — — 20,633 
Substandard— — — 2,197 777 — — — 2,974 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — 2,197 20,505 905 — — 23,607 
Pass/Watch168,674 362,542 103,067 38,639 16,917 62 1,986 691,887 
Total construction$168,674 362,542 103,067 40,836 37,422 967 — 1,986 715,494 
Residential (1)
Special mention$— — — — — 1,114 — — 1,114 
Substandard— — — — 264 4,417 — — 4,681 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — — 264 5,531 — — 5,795 
Pass/Watch151,077 212,697 211,445 95,872 58,226 442,586 — — 1,171,903 
Total residential$151,077 212,697 211,445 95,872 58,490 448,117 — — 1,177,698 
Total Mortgage
Special mention$— — 3,071 26,809 72,237 26,489 — — 128,606 
Substandard— — — 2,197 19,061 18,547 434 — 40,239 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — 3,071 29,006 91,298 45,036 434 — 168,845 
22

Gross Loans Held for Investment by Year of Origination
at December 31, 2022
20222021202020192018Prior to 2018Revolving LoansRevolving loans to term loansTotal Loans
Pass/Watch1,413,668 1,356,116 1,164,188 915,938 481,262 2,109,679 95,603 17,896 7,554,350 
Total Mortgage$1,413,668 1,356,116 1,167,259 944,944 572,560 2,154,715 96,037 17,896 7,723,195 
Commercial
Special mention$75 1,148 444 201 10,156 4,379 14,530 140 31,073 
Substandard— 7,605 10,230 4,391 3,561 13,734 7,604 364 47,489 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified75 8,753 10,674 4,592 13,717 18,113 22,134 504 78,562 
Pass/Watch377,662 320,334 162,175 161,150 87,396 522,798 492,717 30,876 2,155,108 
Total commercial$377,737 329,087 172,849 165,742 101,113 540,911 514,851 31,380 2,233,670 
Consumer (1)
Special mention$— — — — — 146 — — 146 
Substandard— 8 — 109 332 209 — 658 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — 8 — 109 478 209 — 804 
Pass/Watch30,132 20,671 2,909 16,682 16,156 88,173 115,777 13,476 303,976 
Total consumer$30,132 20,671 2,917 16,682 16,265 88,651 115,986 13,476 304,780 
Total Loans
Special mention$75 1,148 3,515 27,010 82,393 31,014 14,530 140 159,825 
Substandard— 7,605 10,238 6,588 22,731 32,613 8,247 364 88,386 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified75 8,753 13,753 33,598 105,124 63,627 22,777 504 248,211 
Pass/Watch1,821,462 1,697,121 1,329,272 1,093,770 584,814 2,720,650 704,097 62,248 10,013,434 
Total gross loans $1,821,537 1,705,874 1,343,025 1,127,368 689,938 2,784,277 726,874 62,752 10,261,645 
(1) For residential and consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan.
Note 5. Deposits
Deposits at June 30, 2023 and December 31, 2022 are summarized as follows (in thousands):
June 30, 2023December 31, 2022
Savings$1,275,262 1,438,583 
Money market2,272,648 2,542,160 
NOW3,334,509 3,186,926 
Non-interest bearing2,358,372 2,643,919 
Certificates of deposit1,020,329 751,436 
Total deposits$10,261,120 10,563,024 


23

Note 6. Borrowed Funds
Borrowed funds at June 30, 2023 and December 31, 2022 are summarized as follows (in thousands):
June 30, 2023December 31, 2022
Securities sold under repurchase agreements$82,470 98,000 
FHLB line of credit179,000 486,000 
FHLB advances1,588,244 753,370 
Total borrowed funds$1,849,714 1,337,370 
At June 30, 2023, FHLB advances were at fixed rates and mature between July 2023 and September 2026, and at December 31, 2022, FHLB advances were at fixed rates with maturities between January 2023 and July 2025. These advances are secured by loans receivable under a blanket collateral agreement.
Scheduled maturities of FHLB advances and overnight borrowings at June 30, 2023 are as follows (in thousands):
 2023
Due in one year or less$1,020,648 
Due after one year through two years514,492 
Due after two years through three years174,660 
Due after three years through four years57,444 
Thereafter— 
Total FHLB advances and overnight borrowings$1,767,244 
Scheduled maturities of securities sold under repurchase agreements at June 30, 2023 are as follows (in thousands):
 2023
Due in one year or less$82,470 
Thereafter— 
Total securities sold under repurchase agreements$82,470 
The following tables set forth certain information as to borrowed funds for the periods ended June 30, 2023 and December 31, 2022 (in thousands):
Maximum
balance
Average
balance
Weighted average
interest rate
June 30, 2023
Securities sold under repurchase agreements$99,669 93,066 1.41 %
FHLB overnight borrowings402,000 223,980 4.87 
FHLB advances1,588,245 1,125,698 2.78 
December 31, 2022
Securities sold under repurchase agreements$125,506 113,550 0.38 %
FHLB overnight borrowings486,000 139,012 3.32 
FHLB advances753,370 503,713 0.85 
Securities sold under repurchase agreements include arrangements with deposit customers of the Bank to sweep funds into short-term borrowings. The Bank uses available for sale debt securities to pledge as collateral for the repurchase agreements.
At June 30, 2023 and December 31, 2022, available for sale debt securities pledged as collateral for repurchase agreements totaled $95.5 million and $116.5 million, respectively.
Interest expense on borrowings for the three and six months ended June 30, 2023 amounted to $14.1 million and $21.6 million, respectively. Interest expense on borrowings for the three and six months ended June 30, 2022 amounted to $1.1 million and $2.3 million, respectively.

Note 7. Components of Net Periodic Benefit Cost
24

The Bank has a noncontributory defined benefit pension plan covering its full-time employees who had attained age 21 with at least one year of service as of April 1, 2003. The pension plan was frozen on April 1, 2003. All participants in the Plan are 100% vested. The pension plan’s assets are invested in investment funds and group annuity contracts currently managed by the Principal Financial Group and Allmerica Financial.
In addition to pension benefits, certain health care and life insurance benefits are currently made available to certain of the Bank’s retired employees. The costs of such benefits are accrued based on actuarial assumptions from the date of hire to the date the employee is fully eligible to receive the benefits. Effective January 1, 2003, eligibility for retiree health care benefits was frozen as to new entrants, and benefits were eliminated for employees with less than ten years of service as of December 31, 2002. Effective January 1, 2007, eligibility for retiree life insurance benefits was frozen as to new entrants and retiree life insurance benefits were eliminated for employees with less than ten years of service as of December 31, 2006.
Net periodic (benefit) increase cost for pension benefits and other post-retirement benefits for the three and six months ended June 30, 2023 and 2022 includes the following components (in thousands):
Three months ended June 30,Six months ended June 30,
Pension benefitsOther post-retirement benefitsPension benefitsOther post-retirement benefits
20232022202320222023202220232022
Service cost$— — 3 7 $— — 6 14 
Interest cost302 214 150 111 604 428 300 222 
Expected return on plan assets(706)(864)— — (1,412)(1,728)— — 
Amortization of prior service cost— — — — — — — — 
Amortization of the net loss (gain)177 — (533)(326)354 — (1,066)(652)
Net periodic (decrease) increase in benefit cost$(227)(650)(380)(208)$(454)(1,300)(760)(416)
In its consolidated financial statements for the year ended December 31, 2022, the Company previously disclosed that it does not expect to contribute to the pension plan in 2023. As of June 30, 2023, no contributions have been made to the pension plan.
The changes in net periodic benefit cost for pension benefits and other post-retirement benefits for the three and six months ended June 30, 2023 were calculated using the January 1, 2023 pension and other post-retirement benefits actuarial valuations.
Note 8. Impact of Recent Accounting Pronouncements
Accounting Pronouncements Adopted This Year
In March 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-02, "Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures," which addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancing and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities that have adopted ASU 2016-13, ASU 2022-02 was effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption was permitted if an entity had adopted ASU 2016-13. The Company adopted this ASU on January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be recorded with previously applicable GAAP. The Company recorded a $594,000 reduction to the allowance for credit losses, which resulted in a $433,000 cumulative effect adjustment increase, net of tax, to retained earnings.
In March 2022, the FASB issued Accounting Standards Update (ASU) 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging – Portfolio Layer Method. The purpose of this updated guidance is to further align risk management objectives with hedge accounting results on the application of the last-of-layer method, which was first introduced in ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2022-01 is effective for public business entities for fiscal years beginning after December 15, 2022, with early adoption in the interim period permitted. The Company adopted this standard on January 1, 2023 on a prospective basis, with no impact to the consolidated financial statements.
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Accounting Pronouncements Not Yet Adopted
In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)," which provides optional expedients and exceptions for applying GAAP to loan and lease agreements, derivative contracts, and other transactions affected by the anticipated transition away from LIBOR toward new interest rate benchmarks. For transactions that are modified because of reference rate reform and that meet certain scope guidance: (i) modifications of loan agreements should be accounted for by prospectively adjusting the effective interest rate and the modification will be considered "minor" so that any existing unamortized origination fees/costs would carry forward and continue to be amortized; and (ii) modifications of lease agreements should be accounted for as a continuation of the existing agreement with no reassessments of the lease classification and the discount rate or re-measurements of lease payments that otherwise would be required for modifications not accounted for as separate contracts. ASU 2020-04 also provides numerous optional expedients for derivative accounting. ASU 2020-04 is effective March 12, 2020 through December 31, 2022. An entity may elect to apply ASU 2020-04 for contract modifications as of January 1, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic within the Codification, the amendments in this ASU must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. The Company anticipates this ASU will simplify any modifications we execute between the selected start date (yet to be determined) and December 31, 2022 that are directly related to LIBOR transition by allowing prospective recognition of the continuation of the contract, rather than the extinguishment of the old contract resulting in writing off unamortized fees/costs. In addition, in January 2021, the FASB issued ASU No. 2021-01 “Reference Rate Reform — Scope,” which clarified the scope of ASC 848 relating to contract modifications. In the fourth quarter of 2019, the Company formed a cross-functional team to develop transition plans for the LIBOR cessation to address potential revisions to documentation, as well as customer management and communication, internal training, financial, operational and risk management implications, and legal and contract management. The working group is comprised of individuals from various functional areas including lending, risk management, finance and credit, among others. In addition, the Company has engaged with its regulators and with industry working groups and trade associations to develop strategies for transitioning away from LIBOR. The Company is currently in the process of transitioning from LIBOR and plans to move to the Secured Overnight Financing Rate ("SOFR") and no longer offers LIBOR as an option to customers. The Company has determined that the LIBOR transition and this guidance will not have a material effect on the Company's business operations and consolidated financial statements.

Note 9. Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
Management analyzes the Company's exposure to credit losses for both on-balance sheet and off-balance sheet activity using a consistent methodology for the quantitative framework as well as the qualitative framework. For purposes of estimating the allowance for credit losses for off-balance sheet credit exposures, the exposure that may default includes an estimated drawdown of unused credit based on historical credit utilization factors and current loss factors.
For the three and six months ended June 30, 2023, the Company recorded a $647,000 negative provision and a $92,000 provision for credit losses for off-balance sheet credit exposures, respectively. For the three and six months ended June 30, 2022, the Company recorded a $973,000 and a $3.4 million negative provision for credit losses for off-balance sheet credit exposures, respectively. The $326,000 increase in the provision for the three months ended June 30, 2023, compared to the same period in 2022, was primarily the result of the period-over-period relative change in line of credit utilization. The $3.5 million increase in the provision for the six months ended June 30, 2023, compared to the six months ended June 30, 2022, was primarily the result of the period-over-period relative change in line of credit utilization and an increase in projected loss factors as a result of a worsened economic forecast.
The allowance for credit losses for off-balance sheet credit exposures was $3.2 million at June 30, 2023 and December 31, 2022, and are included in other liabilities on the Consolidated Statements of Financial Condition.
Note 10. Fair Value Measurements
The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. Where quoted market values in an active market are not readily available, management utilizes various valuation techniques to estimate fair value.
Fair value is an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. However, in many instances fair value estimates may not be substantiated by comparison to independent markets and may not be realized in an immediate sale of the financial instrument.
26

GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1:
Unadjusted quoted market prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2:
Quoted prices in markets that are not active, or inputs that are observable either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3:
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The valuation techniques are based upon the unpaid principal balance only, and exclude any accrued interest or dividends at the measurement date. Interest income and expense and dividend income are recorded within the consolidated statements of income depending on the nature of the instrument using the effective interest method based on acquired discount or premium.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The valuation techniques described below were used to measure fair value of financial instruments in the table below on a recurring basis as of June 30, 2023 and December 31, 2022.
Available for Sale Debt Securities, at Fair Value
For available for sale debt securities, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third-party data service providers or dealer market participants with whom the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to benchmark to comparable securities. The Company evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. As management is responsible for the determination of fair value, it performs quarterly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, management compares the prices received from the pricing service to a secondary pricing source. Additionally, management compares changes in the reported market values and returns to relevant market indices to test the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has generally not resulted in an adjustment in the prices obtained from the pricing service.
Equity Securities, at Fair Value
The Company holds equity securities that are traded in active markets with readily accessible quoted market prices that are considered Level 1 inputs.
Derivatives
The Company records all derivatives on the statements of financial condition at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. The Company has interest rate derivatives resulting from a service provided to certain qualified borrowers in a loan related transaction which, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. As such, all changes in fair value of the Company’s derivatives are recognized directly in earnings.
The Company also uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges, and which satisfy hedge accounting requirements, involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. These derivatives were used to hedge the variable cash outflows associated with FHLBNY borrowings and brokered demand deposits. The change in the fair value of these derivatives is recorded in accumulated other
27

comprehensive income (loss), and is subsequently reclassified into earnings in the period that the forecasted transactions affect earnings.
The fair value of the Company's derivatives is determined using discounted cash flow analysis using observable market-based inputs, which are considered Level 2 inputs.
Assets Measured at Fair Value on a Non-Recurring Basis
The valuation techniques described below were used to estimate fair value of financial instruments measured on a non-recurring basis as of June 30, 2023 and December 31, 2022.
Collateral-Dependent Impaired Loans
For loans measured for impairment based on the fair value of the underlying collateral, fair value was estimated using a market approach. The Company measures the fair value of collateral underlying impaired loans primarily through obtaining independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments, on an individual case-by-case basis, to comparable assets based on the appraisers’ market knowledge and experience, as well as adjustments for estimated costs to sell between 5% and 10%. Management classifies these loans as Level 3 within the fair value hierarchy.
Foreclosed Assets
Assets acquired through foreclosure or deed in lieu of foreclosure are carried at fair value, less estimated selling costs, which range between 5% and 10%. Fair value is generally based on independent appraisals that rely upon quoted market prices for similar assets in active markets. These appraisals include adjustments, on an individual case basis, to comparable assets based on the appraisers’ market knowledge and experience, and are classified as Level 3. When an asset is acquired, the excess of the loan balance over fair value less estimated selling costs is charged to the allowance for credit losses. A reserve for foreclosed assets may be established to provide for possible write-downs and selling costs that occur subsequent to foreclosure. Foreclosed assets are carried net of the related reserve. Operating results from real estate owned, including rental income, operating expenses, and gains and losses realized from the sales of real estate owned, are recorded as incurred.
There were no changes to the valuation techniques for fair value measurements as of June 30, 2023 or December 31, 2022.
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The following tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair values as of June 30, 2023 and December 31, 2022, by level within the fair value hierarchy (in thousands):
Fair Value Measurements at Reporting Date Using:
June 30, 2023Quoted Prices in Active  Markets for Identical Assets (Level 1)Significant Other Observable  Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Measured on a recurring basis:
Available for sale debt securities:
U.S. Treasury obligations$247,067 247,067 — — 
Agency obligations31,753 31,753 — — 
Mortgage-backed securities1,346,724 — 1,346,724 — 
Asset-backed securities34,506 — 34,506 — 
State and municipal obligations55,725 — 55,725 — 
Corporate obligations34,114 — 34,114 — 
Total available for sale debt securities1,749,889 278,820 1,471,069 — 
Equity securities1,238 1,238 — — 
Derivative assets131,191 — 131,191 — 
$1,882,318 280,058 1,602,260 — 
Derivative liabilities$108,067 — 108,067 — 
Measured on a non-recurring basis:
Loans measured for impairment based on the fair value of the underlying collateral$14,582 — — 14,582 
Foreclosed assets13,697 — — 13,697 
$28,279 — — 28,279 
Fair Value Measurements at Reporting Date Using:
December 31, 2022Quoted Prices in Active  Markets for Identical Assets (Level 1)Significant Other Observable  Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Measured on a recurring basis:
Available for sale debt securities:
U.S. Treasury obligations$245,816 245,816 — — 
Mortgage-backed securities1,427,139 — 1,427,139 — 
Asset-backed securities37,621 — 37,621 — 
State and municipal obligations56,864 — 56,864 — 
Corporate obligations36,108 — 36,108 — 
Total available for sale debt securities1,803,548 245,816 1,557,732 — 
Equity Securities1,147 1,147 — — 
Derivative assets148,151 — 148,151 — 
$1,952,846 246,963 1,705,883 — 
Derivative liabilities$120,896 — 120,896 — 
Measured on a non-recurring basis:
Loans measured for impairment based on the fair value of the underlying collateral$23,988 — — 23,988 
Foreclosed assets2,124 — — 2,124 
$26,112 — — 26,112 
There were no transfers between Level 1, Level 2 and Level 3 during the three and six months ended June 30, 2023.
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Other Fair Value Disclosures
The Company is required to disclose estimated fair value of financial instruments, both assets and liabilities on- and off- the balance sheet, for which it is practicable to estimate fair value. The following is a description of valuation methodologies used for those assets and liabilities.
Cash and Cash Equivalents
For cash and due from banks, federal funds sold and short-term investments, the carrying amount approximates fair value. At June 30, 2023 and December 31, 2022, $70,000 was included in cash and cash equivalents, representing cash collateral pledged to secure loan level swaps, risk participation agreements and reserves required by banking regulations.
Held to Maturity Debt Securities
For held to maturity debt securities, fair value was estimated using a market approach. The majority of the Company’s securities are fixed income instruments that are not quoted on an exchange, but are traded in active markets. Prices for these instruments are obtained through third party data service providers or dealer market participants with whom the Company has historically transacted both purchases and sales of securities. Prices obtained from these sources include market quotations and matrix pricing. Matrix pricing, a Level 2 input, is a mathematical technique used principally to value certain securities to benchmark to comparable securities. Management evaluates the quality of Level 2 matrix pricing through comparison to similar assets with greater liquidity and evaluation of projected cash flows. As management is responsible for the determination of fair value, it performs quarterly analyses on the prices received from the pricing service to determine whether the prices are reasonable estimates of fair value. Specifically, management compares the prices received from the pricing service to a secondary pricing source. Additionally, management compares changes in the reported market values and returns to relevant market indices to test the reasonableness of the reported prices. The Company’s internal price verification procedures and review of fair value methodology documentation provided by independent pricing services has generally not resulted in adjustment in the prices obtained from the pricing service. The Company also holds debt instruments issued by the U.S. government and U.S. government agencies that are traded in active markets with readily accessible quoted market prices that are considered Level 1 within the fair value hierarchy.
Federal Home Loan Bank of New York ("FHLBNY") Stock
The carrying value of FHLBNY stock is its cost. The fair value of FHLBNY stock is based on redemption at par value. The Company classifies the estimated fair value as Level 1 within the fair value hierarchy.
Loans
Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial mortgage, residential mortgage, commercial, construction and consumer. Each loan category is further segmented into fixed and adjustable-rate interest terms and into performing and non-performing categories. The fair value of performing loans was estimated using a combination of techniques, including a discounted cash flow model that utilizes a discount rate that reflects the Company’s current pricing for loans with similar characteristics and remaining maturity, adjusted by an amount for estimated credit losses inherent in the portfolio at the balance sheet date (i.e. exit pricing). The rates take into account the expected yield curve, as well as an adjustment for prepayment risk, when applicable. The Company classifies the estimated fair value of its loan portfolio as Level 3.
The fair value for significant non-performing loans was based on recent external appraisals of collateral securing such loans, adjusted for the timing of anticipated cash flows. The Company classifies the estimated fair value of its non-performing loan portfolio as Level 3.
Deposits
The fair value of deposits with no stated maturity, such as non-interest bearing demand deposits and savings deposits, was equal to the amount payable on demand and classified as Level 1. The estimated fair value of certificates of deposit was based on the discounted value of contractual cash flows. The discount rate was estimated using the Company’s current rates offered for deposits with similar remaining maturities. The Company classifies the estimated fair value of its certificates of deposit portfolio as Level 2.
30

Borrowed Funds
The fair value of borrowed funds was estimated by discounting future cash flows using rates available for debt with similar terms and maturities and is classified by the Company as Level 2 within the fair value hierarchy.
Commitments to Extend Credit and Letters of Credit
The fair value of commitments to extend credit and letters of credit was estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. For fixed rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed rates. The Company classifies these commitments as Level 3 within the fair value hierarchy.
Limitations
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on- and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.
Significant assets and liabilities that are not considered financial assets or liabilities include goodwill and other intangibles, deferred tax assets and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
The following tables present the Company’s financial instruments at their carrying and fair values as of June 30, 2023 and December 31, 2022. Fair values are presented by level within the fair value hierarchy.
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Fair Value Measurements at June 30, 2023 Using:
(Dollars in thousands)Carrying valueFair valueQuoted Prices in Active  Markets for Identical Assets (Level 1)Significant Other Observable  Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents$208,872 208,872 208,872 — — 
Available for sale debt securities:
U.S. Treasury obligations247,067 247,067 247,067 — — 
Agency obligations31,753 31,753 31,753 — — 
Mortgage-backed securities1,346,724 1,346,724 — 1,346,724 — 
Asset-backed securities34,506 34,506 — 34,506 — 
State and municipal obligations55,725 55,725 — 55,725 — 
Corporate obligations34,114 34,114 — 34,114 — 
Total available for sale debt securities$1,749,889 1,749,889 278,820 1,471,069 — 
Held to maturity debt securities, net of allowance for credit losses:
Agency obligations12,096 11,167 11,167 — — 
State and municipal obligations356,987 344,661 — 344,661 — 
Corporate obligations9,811 9,201 — 9,201 — 
Total held to maturity debt securities, net of allowance for credit losses$378,894 365,029 11,167 353,862 — 
FHLBNY stock93,330 93,330 93,330 — — 
Equity Securities1,238 1,238 1,238 — — 
Loans, net of allowance for credit losses10,428,458 9,969,672 — — 9,969,672 
Derivative assets131,191 131,191 — 131,191 — 
Financial liabilities:
Deposits other than certificates of deposits$9,240,791 9,240,791 9,240,791 — — 
Certificates of deposit1,020,329 1,015,211 — 1,015,211 — 
Total deposits$10,261,120 10,256,002 9,240,791 1,015,211 — 
Borrowings1,849,714 1,832,814 — 1,832,814 — 
Subordinated debentures10,596 9,118 — 9,118 — 
Derivative liabilities108,067 108,067 — 108,067 — 
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Fair Value Measurements at December 31, 2022 Using:
(Dollars in thousands)Carrying valueFair valueQuoted Prices in Active  Markets for Identical Assets (Level 1)Significant Other Observable  Inputs (Level 2)Significant Unobservable Inputs (Level 3)
Financial assets:
Cash and cash equivalents$186,508 186,508 186,508 — — 
Available for sale debt securities:
U.S. Treasury obligations245,816 245,816 245,816 — — 
Mortgage-backed securities1,427,139 1,427,139 — 1,427,139 — 
Asset-backed securities37,621 37,621 — 37,621 — 
State and municipal obligations56,864 56,864 — 56,864 — 
Corporate obligations36,108 36,108 — 36,108 — 
Total available for sale debt securities$1,803,548 1,803,548 245,816 1,557,732 — 
Held to maturity debt securities:
Agency obligations$9,997 8,964 8,964 — — 
State and municipal obligations366,146 353,417 — 353,417 — 
Corporate obligations11,780 11,087 — 11,087 — 
Total held to maturity debt securities$387,923 373,468 8,964 364,504 — 
FHLBNY stock68,554 68,554 68,554 — — 
Equity Securities1,147 1,147 1,147 — — 
Loans, net of allowance for credit losses10,160,860 9,768,460 — — 9,768,460 
Derivative assets148,151 148,151 — 148,151 — 
Financial liabilities:
Deposits other than certificates of deposits$9,811,588 9,811,588 9,811,588 — — 
Certificates of deposit751,436 745,155 — 745,155 — 
Total deposits$10,563,024 10,556,743 9,811,588 745,155 — 
Borrowings1,337,370 1,324,578 — 1,324,578 — 
Subordinated debentures10,493 9,422 — 9,422 — 
Derivative liabilities120,896 120,896 — 120,896 — 

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Note 11. Other Comprehensive (Loss) Income
The following table presents the components of other comprehensive (loss) income, both gross and net of tax, for the three and six months ended June 30, 2023 and 2022 (in thousands):
Three months ended June 30,
20232022
Before
Tax		Tax
Effect		After
Tax		Before
Tax		Tax
Effect		After
Tax
Components of Other Comprehensive Income:
Unrealized gains and losses on available for sale debt securities:
Net unrealized (losses) gains arising during the period$(20,178)5,452 (14,726)(62,477)16,744 (45,733)
Reclassification adjustment for gains included in net income— — — (58)16 (42)
Total(20,178)5,452 (14,726)(62,535)16,760 (45,775)
Unrealized gains and losses on derivatives (cash flow hedges):
Net unrealized gains (losses) arising during the period5,002 (1,352)3,6503,110 (834)2,276 
Reclassification adjustment for gains included in net income(4,124)1,114 (3,010)(162)44 (118)
Total878 (238)640 2,948 (790)2,158 
Amortization related to post-retirement obligations(358)97 (261)(322)86 (236)
Total other comprehensive (loss) income$(19,658)5,311 (14,347)(59,909)16,056 (43,853)
Six months ended June 30,
20232022
Before
Tax		Tax
Effect		After
Tax		Before
Tax		Tax
Effect		After
Tax
Components of Other Comprehensive Income:
Unrealized gains and losses on available for sale debt securities:
Net unrealized gains (losses) arising during the period$7,641 (1,503)6,138 (178,558)47,854 (130,704)
Reclassification adjustment for gains included in net income— — — (58)16 (42)
Total7,641 (1,503)6,138 (178,616)47,870 (130,746)
Unrealized gains and losses on derivatives (cash flow hedges):
Net unrealized gains (losses) arising during the period4,219 (1,186)3,033 16,703 (4,476)12,227 
Reclassification adjustment for (gains) losses included in net income(8,343)2,254 (6,089)504 (135)369 
Total(4,124)1,068 (3,056)17,207 (4,611)12,596 
Amortization related to post-retirement obligations(727)197 (530)(700)188 (512)
Total other comprehensive income (loss)$2,790 (238)2,552 (162,109)43,447 (118,662)
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The following tables present the changes in the components of accumulated other comprehensive (loss), net of tax, for the three and six months ended June 30, 2023 and 2022 (in thousands):
Changes in Accumulated Other Comprehensive (Loss) by Component, net of tax
for the three months ended June 30,
20232022
Unrealized
Losses on
Available for Sale Debt Securities		Post- Retirement
Obligations		Unrealized Gains on Derivatives (cash flow hedges)Accumulated
Other
Comprehensive
Loss		Unrealized Gains on
 Available for Sale Debt Securities		Post-  Retirement
Obligations		Unrealized Losses on Derivatives (cash flow hedges)Accumulated
Other
Comprehensive Loss
Balance at
March 31,		$(165,750)1,303 16,301 (148,146)(85,182)2,705 14,531 (67,946)
Current - period other comprehensive (loss)(14,726)(261)640 (14,347)(45,775)(236)2,158 (43,853)
Balance at June 30,$(180,476)1,042 16,941 (162,493)(130,957)2,469 16,689 (111,799)
Changes in Accumulated Other Comprehensive (Loss) by Component, net of tax
for the six months ended June 30,
20232022
Unrealized
Losses on
Available for Sale Debt Securities		Post-  Retirement
Obligations		Unrealized Gains on Derivatives (cash flow hedges)Accumulated
Other
Comprehensive
Income (Loss)		Unrealized Gains (Losses) on
 Available for Sale Debt Securities		Post- Retirement
Obligations		Unrealized Gains (Losses) on Derivatives (cash flow hedges)Accumulated
Other
Comprehensive Income (Loss)
Balance at December 31,$(186,614)1,572 19,997 (165,045)(211)2,981 4,093 6,863 
Current - period other comprehensive income (loss)6,138 (530)(3,056)2,552 (130,746)(512)12,596 (118,662)
Balance at June 30,$(180,476)1,042 16,941 (162,493)(130,957)2,469 16,689 (111,799)
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The following tables summarize the reclassifications from accumulated other comprehensive (loss) to the consolidated statements of income for the three and six months ended June 30, 2023 and 2022 (in thousands):
Reclassifications From Accumulated Other Comprehensive
Income ("AOCI")
Amount reclassified from AOCI for the three months ended June 30,Affected line item in the Consolidated
Statement of Income
20232022
Details of AOCI:
Available for sale debt securities:
Realized net gains on the sale of securities available for sale$— (58)Net gain on securities transactions
— 16 Income tax expense
$— (42)Net of tax
Cash flow hedges:
Realized net gains on derivatives$(4,124)(162)Interest expense
1,114 44 Income tax expense
$(3,010)(118)
Post-retirement obligations:
Amortization of actuarial gains$(356)(326)
Compensation and employee benefits (1)
96 84 Income tax expense
Total reclassification$(260)(242)Net of tax
Total reclassifications$(3,270)(402)Net of tax
Reclassifications From Accumulated Other Comprehensive
Income ("AOCI")
Amount reclassified from AOCI for the six months ended June 30,Affected line item in the Consolidated
Statement of Income
20232022
Details of AOCI:
Available for sale debt securities:
Realized net gains on the sale of securities available for sale$— (58)Net gain on securities transactions
— 16 Income tax expense
$— (42)Net of tax
Cash flow hedges:
Realized net (gains) losses on derivatives$(8,343)504 Interest expense
2,254 (136)Income tax expense
$(6,089)368 
Post-retirement obligations:
Amortization of actuarial gains$(712)(652)
Compensation and employee benefits (1)
192 171 Income tax expense
Total reclassification$(520)(481)Net of tax
Total reclassifications$(6,609)(155)Net of tax
(1) This item is included in the computation of net periodic benefit cost. See Note 7. Components of Net Periodic Benefit Cost.

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Note 12. Derivative and Hedging Activities
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through the management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities.
Non-designated Hedges. Derivatives not designated in qualifying hedging relationships are not speculative and result from a service the Company provides to certain qualified commercial borrowers in loan related transactions which, therefore, are not used to manage interest rate risk in the Company’s assets or liabilities. The Company may execute interest rate swaps with qualified commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. The interest rate swap agreement which the Company executes with the commercial borrower is collateralized by the borrower's commercial real estate financed by the Company. As the Company has not elected to apply hedge accounting and these interest rate swaps do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. At June 30, 2023 and December 31, 2022, the Company had 152 loan related interest rate swaps with aggregate notional amounts of $2.23 billion and $2.40 billion, respectively.
The Company periodically enters into risk participation agreements ("RPAs"), with the Company functioning as either the lead institution, or as a participant when another company is the lead institution on a commercial loan. These RPAs are entered into to manage the credit exposure on interest rate contracts associated with these loan participation agreements. Under the RPAs, the Company will either receive or make a payment in the event the borrower defaults on the related interest rate contract. The Company has minimum collateral posting thresholds with certain of its risk participation counterparties, and has posted collateral of $70,000 against the potential risk of default by the borrower under these agreements. For June 30, 2023 and December 31, 2022, the Company had 12 and 14 credit derivatives, respectively, with aggregate notional amounts of $143.5 million and $157.9 million, respectively, from participations in interest rate swaps as part of these loan participation arrangements. At June 30, 2023, the asset and liability positions of these fair value credit derivatives totaled $47,000 and $11,000, respectively, compared to $26,000 and $12,000, respectively, at December 31, 2022.
Cash Flow Hedges of Interest Rate Risk. The Company’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable payment amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. 
Changes in the fair value of derivatives designated and that qualify as cash flow hedges of interest rate risk are recorded in accumulated other comprehensive (loss) income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three and six months ended June 30, 2023 and 2022, such derivatives were used to hedge the variable cash outflows associated with FHLBNY borrowings and brokered demand deposits.
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s borrowings or demand deposits. During the next twelve months, the Company estimates that $15.7 million will be reclassified as a reduction to interest expense. At June 30, 2023, the Company had nine outstanding interest rate derivatives with an aggregate notional amount of $405.0 million that were each designated as a cash flow hedge of interest rate risk.
Assets and liabilities relating to certain financial instruments, including derivatives, may be eligible for offset in the Consolidated Statements of Financial Condition and/or subject to enforceable master netting arrangements or similar agreements. The Company does not offset asset and liabilities under such arrangements in the Consolidated Statements of Financial Condition.
The tables below present a gross presentation, the effects of offsetting, and a net presentation of the Company’s financial instruments that are eligible for offset in the Consolidated Statements of Condition at June 30, 2023 and December 31, 2022 (in thousands).
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Fair Values of Derivative Instruments as of June 30, 2023
Asset DerivativesLiability Derivatives
Notional AmountConsolidated Statements of Financial Condition
Fair
 value (2)
Notional AmountConsolidated Statements of Financial Condition
Fair
 value (2)
Derivatives not designated as a hedging instrument:
Interest rate products$1,114,765 Other assets$109,589 1,114,765 Other liabilities109,871 
Credit contracts46,768 Other assets47 96,764 Other liabilities11 
Total derivatives not designated as a hedging instrument109,636 109,882 
Derivatives designated as a hedging instrument:
Interest rate products405,000 Other assets24,769 — Other liabilities— 
Total gross derivative amounts recognized on the balance sheet134,405 109,882 
Gross amounts offset on the balance sheet— — 
Net derivative amounts presented on the balance sheet$134,405 109,882 
Gross amounts not offset on the balance sheet:
Financial instruments - institutional counterparties$— — 
Cash collateral - institutional counterparties (1)
129,021 — 
Net derivatives not offset$5,384 109,882 
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Fair Values of Derivative Instruments as of December 31, 2022
Asset DerivativesLiability Derivatives
Notional AmountConsolidated Statements of Financial Condition
Fair
 value (2)
Notional AmountConsolidated Statements of Financial Condition
Fair
 value (2)
Derivatives not designated as a hedging instrument:
Interest rate products$1,198,191 Other assets$122,047 $1,198,191 Other liabilities122,378 
Credit contracts47,143 Other assets26 110,714 Other liabilities12 
Total derivatives not designated as a hedging instrument122,073 122,390 
Derivatives designated as a hedging instrument:
Interest rate products460,000 Other assets29,119 — Other liabilities— 
Total gross derivative amounts recognized on the balance sheet151,192 122,390 
Gross amounts offset on the balance sheet— — 
Net derivative amounts presented on the balance sheet$151,192 122,390 
Gross amounts not offset on the balance sheet:
Financial instruments - institutional counterparties$— — 
Cash collateral - institutional counterparties (1)
149,800 — 
Net derivatives not offset$1,392 122,390 
(1) Cash collateral represents the amount that cannot be used to offset our derivative assets and liabilities from a gross basis to a net basis in accordance with the applicable accounting guidance. The application of the cash collateral cannot reduce the net derivative position below zero. Therefore, excess cash collateral, if any, is not reflected above.
(2) The fair values related to interest rate products in the above net derivative tables show the total value of assets and liabilities, which include accrued interest receivable and accrued interest payable for the periods ended June 30, 2023 and December 31, 2022.
The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income during the three and six months ended June 30, 2023 and 2022 (in thousands).
Gain (loss) recognized in income on derivatives for the three months ended
Consolidated Statements of IncomeJune 30, 2023June 30, 2022
Derivatives not designated as a hedging instrument:
Interest rate productsOther income$126 77 
Credit contractsOther income(8)(18)
Total$118 59 
Derivatives designated as a hedging instrument:
Interest rate productsInterest (income) expense$(4,124)(162)
Total$(4,124)(162)
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Gain (loss) recognized in income on derivatives for the six months ended
Consolidated Statements of IncomeJune 30, 2023June 30, 2022
Derivatives not designated as a hedging instrument:
Interest rate productsOther income$52 443 
Credit contractsOther income(4)(35)
Total$48 408 
Derivatives designated as a hedging instrument:
Interest rate productsInterest (income) expense$(8,343)504 
Total$(8,343)504 
The Company has agreements with certain of its dealer counterparties which contain a provision that if the Company defaults on any of its indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be deemed in default on its derivative obligations. In addition, the Company has agreements with certain of its dealer counterparties which contain a provision that if the Company fails to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.
At June 30, 2023, the Company had four dealer counterparties. The Company had a net asset position with respect to all of its counterparties.
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Note 13. Revenue Recognition
The Company generates revenue from several business channels. The guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606) does not apply to revenue associated with financial instruments, including interest income on loans and investments, which comprise the majority of the Company's revenue. For both the three and six months ended June 30, 2023, the out-of-scope revenue related to financial instruments was 88.5% and 87.6% of the Company's total revenue, compared to 83.5% for the three and six months ended June 30, 2022, respectively. Revenue-generating activities that are within the scope of Topic 606, are components of non-interest income. These revenue streams are generally classified into three categories: wealth management revenue, insurance agency income and banking service charges and other fees.
The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three and six months ended June 30, 2023 and 2022 (in thousands):
Three months ended June 30,Six months ended June 30,
2023202220232022
Non-interest income
In-scope of Topic 606:
Wealth management fees$6,919 7,024 13,834 14,489 
Insurance agency income3,847 2,850 7,950 6,270 
Banking service charges and other fees:
Service charges on deposit accounts3,050 3,068 6,413 6,031 
Debit card and ATM fees761 846 1,466 1,616 
Total banking service charges and other fees3,811 3,914 7,879 7,647 
Total in-scope non-interest income14,577 13,788 29,663 28,406 
Total out-of-scope non-interest income4,810 7,144 11,877 12,672 
Total non-interest income$19,387 20,932 41,540 41,078 
Wealth management fee income represents fees earned from customers as consideration for asset management, investment advisory and trust services. The Company’s performance obligation is generally satisfied monthly and the resulting fees are recognized monthly. The fee is generally based upon the average market value of the assets under management ("AUM") for the month and the applicable fee rate. The monthly accrual of wealth management fees is recorded in other assets on the Company's Consolidated Statements of Financial Condition. Fees are received from the customer on a monthly basis. The Company does not earn performance-based incentives. To a lesser extent, optional services such as tax return preparation and estate settlement are also available to existing customers. The Company’s performance obligation for these transaction-based services are generally satisfied, and related revenue recognized, at either a point in time when the service is completed, or in the case of estate settlement, over a relatively short period of time, as each service component is completed.
Insurance agency income, consisting of commissions and fees, is generally recognized as of the effective date of the insurance policy. Commission revenues related to installment billings are recognized on the invoice date. Subsequent commission adjustments are recognized upon the receipt of notification from insurance companies concerning matters necessitating such adjustments. Profit-sharing contingent commissions are recognized when determinable, which is generally when such commissions are received from insurance companies, or when the Company receives formal notification of the amount of such payments.
Service charges on deposit accounts include overdraft service fees, account analysis fees and other deposit related fees. These fees are generally transaction-based, or time-based services. The Company's performance obligation for these services are generally satisfied, and revenue recognized, at the time the transaction is completed, or the service rendered. Fees for these services are generally received from the customer either at the time of transaction, or monthly. Debit card and ATM fees are generally transaction-based. Debit card revenue is primarily comprised of interchange fees earned when a customer's Company card is processed through a card payment network. ATM fees are largely generated when a Company cardholder uses a non-Company ATM, or a non-Company cardholder uses a Company ATM. The Company's performance obligation for these services is satisfied when the service is rendered. Payment is generally received at the time of transaction or monthly.
Out-of-scope non-interest income primarily consists of Bank-owned life insurance and net fees on loan level interest rate swaps, along with gains and losses on the sale of loans and foreclosed real estate, loan prepayment fees and loan servicing fees. None of these revenue streams are subject to the requirements of Topic 606.
41

Note 14. Leases
The following table represents the consolidated statements of financial condition classification of the Company’s right-of use-assets and lease liabilities at June 30, 2023 and December 31, 2021 (in thousands):
ClassificationJune 30, 2023December 31, 2022
Lease Right-of-Use Assets:
Operating lease right-of-use assetsOther assets$60,749 60,577 
Lease Liabilities:
Operating lease liabilitiesOther liabilities$63,916 63,372 
The calculated amount of the right-of-use assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used to present value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If at lease inception the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in the calculation of the right-of-use asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate is readily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception based upon the term of the lease. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was applied.
All of the leases in which the Company is the lessee are classified as operating leases and are primarily comprised of real estate properties for branches and administrative offices with terms extending through 2040.
At June 30, 2023, the weighted-average remaining lease term and the weighted-average discount rate for the Company's operating leases were 8.3 years and 2.71%, respectively.
The following tables represent lease costs and other lease information for the Company's operating leases. The variable lease cost primarily represents variable payments such as common area maintenance and utilities (in thousands):
Three months ended June 30, 2023Three months ended June 30, 2022
Lease Costs
Operating lease cost $2,629 2,586 
Variable lease cost 842 718 
Total lease cost$3,471 3,304 

Six months ended June 30, 2023Six months ended June 30, 2022
Lease Costs
Operating lease cost$5,257 5,393 
Variable lease cost1,722 1,436 
Total lease cost$6,979 6,829 

Cash paid for amounts included in the measurement of lease liabilities:Six months ended June 30, 2023Six months ended June 30, 2022
Operating cash flows from operating leases$4,776 4,060 

42

Future minimum payments for operating leases with initial or remaining terms of one year or more as of June 30, 2023, were as follows (in thousands):
Operating leases
Twelve months ended:
Remainder of 2022$5,094 
20239,971 
20249,488 
20258,518 
20267,667 
Thereafter30,707 
Total future minimum lease payments71,445 
Amounts representing interest7,529 
Present value of net future minimum lease payments$63,916 

Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward-Looking Statements
Certain statements contained herein are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “estimate,” "project," "intend," “anticipate,” “continue,” or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those set forth in Item 1A of the Company's Annual Report on Form 10-K, as supplemented by its Quarterly Reports on Form 10-Q, and those related to the economic environment, particularly in the market areas in which the Company operates, competitive products and pricing, fiscal and monetary policies of the U.S. Government, the effects of the recent turmoil in the banking industry (including the closing of three financial institutions), changes in accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets, the availability of and costs associated with sources of liquidity, the ability to complete, or any delays in completing, the pending merger between the Company and Lakeland; any failure to realize the anticipated benefits of the transaction when expected or at all; certain restrictions during the pendency of the transaction that may impact the Company’s ability to pursue certain business opportunities or strategic transactions; the possibility that the transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events, diversion of management’s attention from ongoing business operations and opportunities; and potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger and integration of the companies.
The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date they are made. The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not assume any duty, and does not undertake, to update any forward-looking statements to reflect events or circumstances after the date of this statement.
Lakeland Bancorp, Inc. Merger Agreement
On September 26, 2022, the Company entered into a definitive merger agreement pursuant to which it will merge (the “merger”) with Lakeland Bancorp, Inc. ("Lakeland"), and Lakeland Bank, a wholly owned subsidiary of Lakeland, will merge with and into Provident Bank, a wholly owned subsidiary of the Company. The merger agreement has been unanimously approved by the boards of both companies and shareholder approval has also been received by both companies. The actual value of the Company’s common stock to be recorded as consideration in the merger will be based on the closing price of Company’s common stock at the time of the merger completion date. Under the merger agreement, each share of Lakeland common stock will be exchanged for 0.8319 shares of the Company's common stock plus cash in lieu of fractional shares.
43

Critical Accounting Policies
The Company considers certain accounting policies to be critically important to the fair presentation of its financial condition and results of operations. These policies require management to make complex judgments on matters which by their nature have elements of uncertainty. The sensitivity of the Company’s consolidated financial statements to these critical accounting policies, and the assumptions and estimates applied, could have a significant impact on its financial condition and results of operations. These assumptions, estimates and judgments made by management can be influenced by a number of factors, including the general economic environment. The Company has identified the allowance for credit losses on loans as a critical accounting policy.
The allowance for credit losses is a valuation account that reflects management’s evaluation of the current expected credit losses in the loan portfolio. The Company maintains the allowance for credit losses through provisions for credit losses that are charged to income. Charge-offs against the allowance for credit losses are taken on loans where management determines that the collection of loan principal and interest is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for credit losses.
The calculation of the allowance for credit losses is a critical accounting policy of the Company. Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience for both the Company and peers provides the basis for the estimation of expected credit losses, where observed credit losses are converted to probability of default rate (“PDR”) curves through the use of segment-specific loss given default (“LGD”) risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment, primarily due to the nature of the underlying collateral. These risk factors were assessed for reasonableness against the Company’s own loss experience and adjusted in certain cases when the relationship between the Company’s historical default and loss severity deviate from that of the wider industry. The historical PDR curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle.
Using the historical relationship between economic conditions and loan performance, management’s expectation of future loan performance is incorporated using an externally developed economic forecast. This forecast is applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model will revert to long-term average economic conditions using a straight-line, time-based methodology. The Company's current forecast period is six quarters, with a four-quarter reversion period to historical average macroeconomic factors. The Company's economic forecast is approved by the Company's Asset-Liability Committee.
The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a quarterly basis, when similar risk characteristics exist. The respective quantitative allowance for each loan segment is measured using an econometric, discounted PDR/LGD modeling methodology in which distinct, segment-specific multi-variate regression models are applied to an external economic forecast. Under the discounted cash flows methodology, expected credit losses are estimated over the effective life of the loans by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for modeled cash flows, adjusted for modeled defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies at the reporting date: management has a reasonable expectation that a modification will be executed with an individual borrower; or when an extension or renewal option is included in the original contract and is not unconditionally cancellable by the Company. Management will assess the likelihood of the option being exercised by the borrower and appropriately extend the maturity for modeling purposes.
The Company considers qualitative adjustments to credit loss estimates for information not already captured in the quantitative component of the loss estimation process. Qualitative factors are based on portfolio concentration levels, model imprecision, changes in industry conditions, changes in the Company’s loan review process, changes in the Company’s loan policies and procedures, and economic forecast uncertainty.
One of the most significant judgments involved in estimating the Company’s allowance for credit losses relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period. As of June 30, 2023, the model incorporated Moody’s baseline economic forecast, as adjusted for qualitative factors, as well as an extensive review of classified loans and loans that were classified as impaired with a specific reserve assigned to those loans. This baseline outlook reflected a worsening economic forecast and related deterioration in the projected commercial property price index over the expected life of the loan portfolio and resulted in recorded provisions of $10.4 million and $16.4 million for the three and six months ended June 30, 2023, and a coverage ratio of 97 basis points. If the Company had used a more pessimistic commercial
44

real estate property price index over the expected life of the loan portfolio, the provision would have increased $6.5 million, with a coverage ratio of 103 basis points.
Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed segments for estimating loss based on type of borrower and collateral which is generally based upon federal call report segmentation. The segments have been combined or sub-segmented as needed to ensure loans of similar risk profiles are appropriately pooled. As of June 30, 2023, the portfolio and class segments for the Company’s loan portfolio were:
•Mortgage Loans – Residential, Commercial Real Estate, Multi-Family and Construction
•Commercial Loans – Commercial Owner Occupied and Commercial Non-Owner Occupied
•Consumer Loans – First Lien Home Equity and Other Consumer
The allowance for credit losses on loans individually evaluated for impairment is based upon loans that have been identified through the Company’s normal loan monitoring process. This process includes the review of delinquent and problem loans at the Company’s Delinquency, Credit, Credit Risk Management and Allowance Committees; or which may be identified through the Company’s loan review process. Generally, the Company only evaluates loans individually for impairment if the loan is non-accrual, non-homogeneous and the balance is at least $1.0 million.
For all classes of loans deemed collateral-dependent, the Company estimates expected credit losses based on the fair value of the collateral less any selling costs. If the loan is not collateral dependent, the allowance for credit losses related to individually assessed loans is based on discounted expected cash flows using the loan’s initial effective interest rate.
For loans acquired that have experienced more-than-insignificant deterioration in credit quality since their origination are considered PCD loans. The Company evaluates acquired loans for deterioration in credit quality based on any of, but not limited to, the following: (1) non-accrual status; (2) modification designation; (3) risk ratings of special mention, substandard or doubtful; (4) watchlist credits; and (5) delinquency status, including loans that are current on acquisition date, but had been previously delinquent. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. Subsequent to the acquisition date, the initial allowance for credit losses on PCD loans will increase or decrease based on future evaluations, with changes recognized in the provision for credit losses.
Management believes the primary risks inherent in the portfolio are a general decline in the economy, a decline in real estate market values, rising unemployment or a protracted period of elevated unemployment, increasing vacancy rates in commercial investment properties and possible increases in interest rates in the absence of economic improvement. Any one or a combination of these events may adversely affect borrowers’ ability to repay the loans, resulting in increased delinquencies, credit losses and higher levels of provisions. Management considers it important to maintain the ratio of the allowance for credit losses to total loans at an acceptable level given current and forecasted economic conditions, interest rates and the composition of the portfolio.
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. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods. In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for credit losses as an integral part of their examination process. Such agencies may require the Company to recognize additions to the allowance or additional write-downs based on their judgments about information available to them at the time of their examination. Although management uses the best information available, the level of the allowance for credit losses remains an estimate that is subject to significant judgment and short-term change.
The CECL approach to calculate the allowance for credit losses on loans is significantly influenced by the composition, characteristics and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecast utilized.
Material changes to these and other relevant factors creates greater volatility to the allowance for credit losses, and therefore, greater volatility to the Company’s reported earnings. For the three and six months ended June 30, 2023, the provision for credit losses on loans totaled $10.4 million and $16.4 million, compared to a $3.0 million provision for credit losses and a $3.4 million negative provision for credit losses for the three and six months ended June 30, 2022. The increases in provision for
45

both periods was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices over the expected life of the loan portfolio within our CECL model, combined with an increase in total loans outstanding.
COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2023 AND DECEMBER 31, 2022
Total assets at June 30, 2023 were $14.03 billion, a $246.2 million increase from December 31, 2022. The increase in total assets was primarily due to a $281.6 million increase in total loans, partially offset by a $37.8 million decrease in total investments.
The Company’s loan portfolio increased $281.6 million to $10.53 billion at June 30, 2023, from $10.25 billion at December 31, 2022. For the six months ended June 30, 2023, loan funding, including advances on lines of credit, totaled $1.79 billion, compared with $2.15 billion for the same period in 2022. During the six months ended June 30, 2023, the loan portfolio had net increases of $57.3 million in commercial mortgage loans, $132.0 million in multi-family loans and $114.8 million in commercial loans, partially offset by net decreases in residential mortgage, construction and consumer loans of $11.5 million $8.3 million and $3.5 million, respectively. Commercial loans, consisting of commercial real estate, multi-family, commercial and construction loans, represented 86.1% of the loan portfolio at June 30, 2023, compared to 85.6% at December 31, 2022.
The Company participates in loans originated by other banks, including participations designated as Shared National Credits (“SNCs”). The Company’s gross commitments and outstanding balances as a participant in SNCs were $186.0 million and $87.0 million, respectively, at June 30, 2023, compared to $203.9 million and $87.3 million, respectively, at December 31, 2022. One SNC relationship, with an outstanding balance of $7.3 million was 90 days or more delinquent at June 30, 2023.
The Company had outstanding junior lien mortgages totaling $135.2 million at June 30, 2023. Of this total, three loans totaling $237,900 were 90 days or more delinquent with an allowance for credit losses of $4,675.
The following table sets forth information regarding the Company’s non-performing assets as of June 30, 2023 and December 31, 2022 (in thousands):
June 30, 2023December 31, 2022
Mortgage loans:
Residential$1,698 1,928 
Commercial7,279 28,212 
Multi-family2,314 1,565 
Construction1,874 1,878 
Total mortgage loans13,165 33,583 
Commercial loans31,885 24,188 
Consumer loans878 738 
Total non-performing loans45,928 58,509 
Foreclosed assets13,697 2,124 
Total non-performing assets$59,625 60,633 
The following table sets forth information regarding the Company’s 60-89 day delinquent loans as of June 30, 2023 and December 31, 2022 (in thousands):
June 30, 2023December 31, 2022
Mortgage loans:
Residential$1,171 1,114 
Commercial1,137 412 
Total mortgage loans2,308 2,623 
Commercial loans90 1,014 
Consumer loans147 147 
Total 60-89 day delinquent loans$2,545 3,784 
At June 30, 2023, the Company’s allowance for credit losses related to the loan portfolio was 0.97% of total loans, compared to 0.79% at December 31, 2022 and June 30, 2022, respectively. The Company recorded a provision for credit losses on loans of
46

$10.4 million and $16.4 million for the three and six months ended June 30, 2023, compared with a provision of $3.0 million and a negative provision of $3.4 million for the three and six months ended June 30, 2022, respectively. For the three and six months ended June 30, 2023, the Company had net charge-offs of $1.1 million and $1.8 million, respectively, compared to net charge-offs of $259,000 and net recoveries of $1.7 million, respectively, for the same periods in 2022. The allowance for credit losses increased $14.1 million to $102.1 million at June 30, 2023 from $88.0 million at December 31, 2022. The increases in provision for both periods was primarily attributable to a worsened economic forecast and related deterioration in the projected commercial property price indices over the expected life of the loan portfolio within our CECL model, combined with an increase in total loans outstanding.
Total non-performing loans were $45.9 million, or 0.44% of total loans at June 30, 2023, compared to $58.5 million, or 0.57% of total loans at December 31, 2022. The $12.6 million decrease in non-performing loans consisted of a $20.9 million decrease in non-performing commercial mortgage loans and a $230,000 decrease in non-performing residential mortgage loans, partially offset by a $7.7 million increase in non-performing commercial loans and a $140,000 increase in non-performing consumer loans.
At June 30, 2023 and December 31, 2022, the Company held foreclosed assets of $13.7 million and $2.1 million, respectively. During the six months ended June 30, 2023, there were three additions to foreclosed assets with an aggregate carrying value of $12.3 million and three properties sold with an aggregate carrying value of $768,000. Foreclosed assets at June 30, 2023 consisted primarily of commercial real estate. Total non-performing assets at June 30, 2023 decreased $1.0 million to $59.6 million, or 0.42% of total assets, from $60.6 million, or 0.44% of total assets at December 31, 2022.
Total investment securities were $2.22 billion at June 30, 2023, a $37.8 million decrease from December 31, 2022. This decrease was primarily due to repayments of mortgage-backed securities and maturities and calls of certain municipal and agency bonds, partially offset by purchases of mortgage-backed and municipal securities and an improvement in unrealized losses on available for sale debt securities.
Total deposits decreased $301.9 million during the six months ended June 30, 2023, to $10.26 billion. Total savings and demand deposit accounts decreased $570.8 million to $9.24 billion at June 30, 2023, while total time deposits increased $268.9 million to $1.02 billion at June 30, 2023. The decrease in savings and demand deposits was largely attributable to a $285.5 million decrease in non-interest bearing demand deposits, a $269.5 million decrease in money market deposits and a $163.3 million decrease in savings deposits, partially offset by a $147.6 million increase in interest bearing demand deposits. During the six months ended June 30, 2023, deposit balances from traditional non-interest and interest bearing demand deposits transitioned into our insured cash sweep ("ICS") product, as a method to increase the level of customers' deposit insurance in light of recent deposit turmoil in the banking industry. The Bank's ICS deposits increased $324.0 million to $382.9 million at June 30, 2023, from $58.9 million at December 31, 2022. The increase in time deposits consisted of a $258.3 million increase in retail time deposits and a $10.6 million increase in brokered time deposits.
Borrowed funds increased $512.3 million during the six months ended June 30, 2023, to $1.85 billion. The increase in borrowings was largely due to asset funding requirements, partially to replace the outflow of deposits. Borrowed funds represented 13.2% of total assets at June 30, 2023, an increase from 9.7% at December 31, 2022.
Stockholders’ equity increased $44.8 million during the six months ended June 30, 2023, to $1.64 billion, primarily due to net income earned for the period and an improvement in unrealized losses on available for sale debt securities, partially offset by cash dividends paid to stockholders. For the six months ended June 30, 2023, common stock repurchases totaled 71,357 shares at an average cost of $23.32 per share, all of which were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. At June 30, 2023, approximately 1.1 million shares remained eligible for repurchase under the current stock repurchase authorization.
Liquidity and Capital Resources. Liquidity refers to the Company’s ability to generate adequate amounts of cash to meet financial obligations to its depositors, to fund loans and securities purchases and operating expenses. Sources of funds include scheduled amortization of loans, loan prepayments, scheduled maturities of unpledged investments, cash flows from securities and the ability to borrow funds from the FHLBNY and approved broker-dealers.
Cash flows from loan payments and maturing investment securities are fairly predictable sources of funds. Changes in interest rates, local economic conditions and the competitive marketplace can influence loan prepayments, prepayments on mortgage-backed securities and deposit flows. For six months ended June 30, 2023 and 2022, loan repayments totaled $1.50 billion and $1.70 billion, respectively.

As deposits have declined, the Company has continued to monitor and focus on deposit behavior and borrowing capacity with the FHLBNY and FRBNY, with current borrowing capacity of $1.31 billion and $1.69 billion, respectively at June 30, 2023. Our estimated uninsured and uncollateralized deposits at June 30, 2023 totaled $2.72 billion. At June 30, 2023, Provident Bank
47

had on balance sheet liquidity and borrowing capacity totaling $3.82 billion, representing 140% of estimated uninsured and uncollateralized deposits. All borrowing capacity is immediately available.
The Bank established the Bank Term Funding Program with the Federal Reserve Bank of New York in March and pledged approximately $521 million in unencumbered security collateral to the facility improving its access to immediate funding. Advances under the Program can be requested until March 11, 2024. As of June 30, 2023, the Company had not taken any advances under the Program, but has this option available as a short term liquidity source.
During the six months ended June 30, 2023, deposit balances from traditional non-interest and interest bearing demand deposits transitioned into our ICS product, as a method to increase the level of customers' deposit insurance in light of recent banking turmoil. As of June 30, 2023, our ICS deposits totaled $382.9 million, compared to $58.9 million at December 31, 2022.
The Federal Deposit Insurance Corporation ("FDIC") and the other federal bank regulatory agencies issued a final rule that revised the leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act, that were effective January 1, 2015. Among other things, the rule established a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), adopted a uniform minimum leverage capital ratio at 4%, increased the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on non-accrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The rule also required unrealized gains and losses on certain “available-for-sale” securities holdings to be included for purposes of calculating regulatory capital unless a one-time opt-out was exercised. The Company exercised the option to exclude unrealized gains and losses from the calculation of regulatory capital. Additional constraints were also imposed on the inclusion in regulatory capital of mortgage-servicing assets, deferred tax assets and minority interests. The rule limits a banking organization’s capital distributions and certain discretionary bonus payments if the banking organization does not hold a “capital conservation buffer,” of 2.5% in addition to the amount necessary to meet its minimum risk-based capital requirements.
In the first quarter of 2020, U.S. federal regulatory authorities issued an interim final rule providing banking institutions that adopted CECL during the 2020 calendar year with the option to delay for two years the estimated impact of CECL on regulatory capital, followed by a three-year transition period to phase out the aggregate amount of the capital benefit provided during the initial two-year delay (i.e., a five-year transition in total). In connection with its adoption of CECL on January 1, 2020, the Company elected to utilize the five-year CECL transition.
At June 30, 2023, the Bank and the Company exceeded all current minimum regulatory capital requirements as follows:
June 30, 2023
RequiredRequired with Capital Conservation BufferActual
AmountRatioAmountRatioAmountRatio
(Dollars in thousands)
Bank:(1)
Tier 1 leverage capital$535,118 4.00 %535,118 4.00 %1,316,418 9.84 %
Common equity Tier 1 risk-based capital528,994 4.50 822,880 7.00 1,316,418 11.20 
Tier 1 risk-based capital705,325 6.00 999,211 8.50 1,316,418 11.20 
Total risk-based capital940,434 8.00 1,234,320 10.50 1,411,146 12.00 
Company:
Tier 1 leverage capital$535,343 4.00 %535,343 4.00 %1,368,362 10.22 %
Common equity Tier 1 risk-based capital529,252 4.50 823,280 7.00 1,355,475 11.53 
Tier 1 risk-based capital705,669 6.00 999,698 8.50 1,368,362 11.63 
Total risk-based capital940,892 8.00 1,234,921 10.50 1,463,090 12.44 
(1) Under the FDIC's prompt corrective action provisions, the Bank is considered well capitalized if it has: a leverage (Tier 1) capital ratio of at least 5.00%; a common equity Tier 1 risk-based capital ratio of 6.50%; a Tier 1 risk-based capital ratio of at least 8.00%; and a total risk-based capital ratio of at least 10.00%.
COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022
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General. The Company reported net income of $32.0 million, or $0.43 per basic and diluted share for the three months ended June 30, 2023, compared to net income of $39.2 million, or $0.53 per basic and diluted share, for the three months ended June 30, 2022. For the six months ended June 30, 2023, the Company reported net income of $72.5 million, or $0.97 per basic share and diluted share, compared to net income of $83.2 million, or $1.11 per basic and diluted share, for the six months ended June 30, 2022.
Net income for the three and six months ended June 30, 2023, was negatively impacted by an increase in funding costs and an increase in the provision for credit losses due to a worsened economic forecast. In addition, transaction costs related to our pending merger with Lakeland Bancorp, Inc. (“Lakeland”) totaled $2.0 million and $3.1 million for the three and six months ended June 30, 2023, respectively.
The following tables sets forth certain information for the three and six months ended June 30, 2023. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities is expressed both in dollars and rates. No tax equivalent adjustments were made. Average balances are daily averages.
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For the three months ended
June 30, 2023June 30, 2022
Average BalanceInterestAverage
Yield/Cost		Average BalanceInterestAverage
Yield/Cost
(Dollars in Thousands) (Unaudited)
Interest Earning Assets:
Deposits$73,470 $947 5.17 %77,761 191 0.98 %
Federal funds sold and other short-term investments88 1 6.75 %99,825 371 1.49 %
Available for sale debt securities1,801,050 10,2902.29 %2,023,199 53528,0931.60 %
Held to maturity debt securities, net (1)
379,958 2,3572.48 %412,229 2,4892.41 %
Equity securities, at fair value1,006 — — %1,019 — — %
Federal Home Loan Bank stock82,171 1,1425.56 %31,682 3614.55 %
Net loans: (2)
Total mortgage loans7,701,072 99,3025.11 %7,252,665 69,0733.78 %
Total commercial loans2,234,043 31,4265.59 %2,107,681 22,3634.22 %
Total consumer loans303,109 4,4315.86 %322,681 3,3444.16 %
Total net loans10,238,224 135,1595.24 %9,683,027 94,7803.89 %
Total interest earning assets$12,575,967 $149,896 4.73 %12,328,742 106,285 3.43 %
Non-Interest Earning Assets:
Cash and due from banks129,979 129,953 
Other assets1,127,109 1,082,514 
Total assets$13,833,055 13,541,209 
Interest Bearing Liabilities:
Demand deposits$5,620,268 $28,613 2.04 %6,189,722 4,458 0.29 %
Savings deposits1,307,830 5370.16 %1,496,064 2850.08 %
Time deposits968,344 7,2973.02 %695,015 8330.48 %
Total deposits7,896,442 36,4471.85 %8,380,801 5,5760.27 %
Borrowed funds1,658,809 14,0883.41 %527,630 1,1040.84 %
Subordinated debentures10,563 255 9.66 %10,355 130 5.05 %
Total interest bearing liabilities$9,565,814 50,7902.13 %8,918,786 6,8100.31 %
Non-Interest Bearing Liabilities:
Non-interest bearing deposits$2,368,960 2,776,507 
Other non-interest bearing liabilities244,604 244,671 
Total non-interest bearing liabilities2,613,564 3,021,178 
Total liabilities12,179,378 11,939,964 
Stockholders' equity1,653,677 1,601,245 
Total liabilities and stockholders' equity$13,833,055 13,541,209 
Net interest income$99,106 99,475 
Net interest rate spread2.60 %3.12 %
Net interest-earning assets$3,010,153 3,409,956 
Net interest margin (3)
3.11 %3.21 %
Ratio of interest-earning assets to total interest-bearing liabilities1.31x1.38x
(1)Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses.
(2)Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans.
(3)Annualized net interest income divided by average interest-earning assets.

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For the six months ended
June 30, 2023June 30, 2022
Average BalanceInterestAverage
Yield/Cost		Average BalanceInterestAverage
Yield/Cost
(Dollars in Thousands) (Unaudited)
Interest Earning Assets:
Deposits$72,750 $1,791 4.97 %175,341 298 0.34 %
Federal funds sold and other short-term investments59 2 6.00 %147,447 911 1.25 %
Available for sale debt securities1,804,814 20,6922.29 %2,069,270 15,6711.51 %
Held to maturity debt securities, net (1)
381,921 4,7252.47 %420,133 5,0852.42 %
Equity securities, at fair value999 — — %1,055 — — %
Federal Home Loan Bank stock70,702 2,1706.14 %31,296 7354.70 %
Net loans: (2)
Total mortgage loans7,671,493 195,2905.07 %7,156,189 132,9083.70 %
Total commercial loans2,191,222 60,1095.49 %2,105,001 45,1844.30 %
Total consumer loans303,724 8,6735.76 %321,796 6,4834.06 %
Total net loans10,166,439 264,0725.18 %9,582,986 184,5753.84 %
Total interest earning assets$12,497,684 $293,452 4.68 %12,427,528 207,275 3.33 %
Non-Interest Earning Assets:
Cash and due from banks136,431 126,423 
Other assets1,149,044 1,062,948 
Total assets$13,783,159 13,616,899 
Interest Bearing Liabilities:
Demand deposits$5,695,507 $50,533 1.79 %6,238,860 8,653 0.28 %
Savings deposits1,352,874 9900.15 %1,486,407 5760.08 %
Time deposits914,358 12,4342.74 %687,956 1,5340.45 %
Total deposits7,962,739 63,9571.62 %8,413,223 10,7630.26 %
Borrowed funds1,442,744 21,5643.01 %538,593 2,2720.85 %
Subordinated debentures10,537 501 9.58 %10,328 239 4.66 %
Total interest bearing liabilities$9,416,020 86,0221.84 %8,962,144 13,2740.30 %
Non-Interest Bearing Liabilities:
Non-interest bearing deposits$2,459,375 2,781,248 
Other non-interest bearing liabilities267,666 229,958 
Total non-interest bearing liabilities2,727,041 3,011,206 
Total liabilities12,143,061 11,973,350 
Stockholders' equity1,640,099 1,643,549 
Total liabilities and stockholders' equity$13,783,160 13,616,899 
Net interest income$207,430 194,001 
Net interest rate spread2.84 %3.03 %
Net interest-earning assets$3,081,664 3,465,384 
Net interest margin (3)
3.29 %3.11 %
Ratio of interest-earning assets to total interest-bearing liabilities1.33x1.39x
(1)Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses.
(2)Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans.
(3)Annualized net interest income divided by average interest-earning assets.
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Net Interest Income. Net interest income decreased $369,000 to $99.1 million for the three months ended June 30, 2023, from $99.5 million for same period in 2022. For the six months ended June 30, 2023, total net interest income increased $13.4 million to $207.4 million, from $194.0 million for the same period in 2022. The decrease in net interest income for the three months ended June 30, 2023, was primarily due to a decrease in lower-costing deposits and an increase in borrowings, combined with unfavorable repricing of both deposits and borrowings, partially offset by originations of new loans and the favorable repricing of adjustable-rate loans. The increase in net interest income for the six months ended June 30, 2023, was primarily driven by an increase in the net interest margin resulting from the favorable repricing of adjustable-rate loans, higher market rates on new loan originations and the originations of higher-yielding loans, partially offset by the unfavorable repricing of both deposits and borrowings, a decrease in lower-costing deposits and an increase in borrowings. Additionally, fees related to the forgiveness of PPP loans, which are recognized in interest income, were approximately $4,000 for the six months ended June 30, 2023, compared to $1.3 million for the six months ended June 30, 2022.
The net interest margin decreased 10 basis points to 3.11% for the quarter ended June 30, 2023, compared to 3.21% for the quarter ended June 30, 2022. The weighted average yield on interest-earning assets increased 130 basis points to 4.73% for the quarter ended June 30, 2023, compared to 3.43% for the quarter ended June 30, 2022, while the weighted average cost of interest-bearing liabilities increased 182 basis points for the quarter ended June 30, 2023, to 2.13%, compared to the quarter ended June 30, 2022. The average cost of interest-bearing deposits for the quarter ended June 30, 2023, was 1.85%, compared to 0.27% for the same period last year. Average non-interest bearing demand deposits totaled $2.37 billion for the quarter ended June 30, 2023, compared to $2.78 billion for the quarter ended June 30, 2022. The average cost of total deposits, including non-interest bearing deposits, was 1.42% for the quarter ended June 30, 2023, compared with 0.20% for the quarter ended June 30, 2022. The average cost of borrowed funds for the quarter ended June 30, 2023, was 3.41%, compared to 0.84% for the same period last year.
For the six months ended June 30, 2023, the net interest margin increased 18 basis points to 3.29%, compared to 3.11% for the six months ended June 30, 2022. The weighted average yield on interest-earning assets increased 135 basis points to 4.68% for the six months ended June 30, 2023, compared to 3.33% for the six months ended June 30, 2022, while the weighted average cost of interest-bearing liabilities increased 154 basis points to 1.84% for the six months ended June 30, 2023, compared to 0.30% for the same period last year. The average cost of interest-bearing deposits increased 136 basis points to 1.62% for the six months ended June 30, 2023, compared to 0.26% for the same period last year. Average non-interest bearing demand deposits totaled $2.46 billion for the six months ended June 30, 2023, compared with $2.78 billion for the six months ended June 30, 2022. The average cost of total deposits, including non-interest bearing deposits, was 1.24% for the six months ended June 30, 2023, compared with 0.19% for the six months ended June 30, 2022. The average cost of borrowings for the six months ended June 30, 2023, was 3.01%, compared to 0.85% for the same period last year.
Interest income on loans secured by real estate increased $30.2 million to $99.3 million for the three months ended June 30, 2023, from $69.1 million for the three months ended June 30, 2022. Commercial loan interest income increased $9.1 million to $31.4 million for the three months ended June 30, 2023, from $22.4 million for the three months ended June 30, 2022. Consumer loan interest income increased $1.1 million to $4.4 million for the three months ended June 30, 2023, from $3.3 million for the three months ended June 30, 2022. For the three months ended June 30, 2023, the average balance of total loans increased $555.2 million to $10.24 billion, compared to the same period in 2022. The average yield on total loans for the three months ended June 30, 2023, increased 135 basis points to 5.24%, from 3.89% for the same period in 2022.
Interest income on loans secured by real estate increased $62.4 million to $195.3 million for the six months ended June 30, 2023, from $132.9 million for the six months ended June 30, 2022. Commercial loan interest income increased $14.9 million to $60.1 million for the six months ended June 30, 2023, from $45.2 million for the six months ended June 30, 2022. Consumer loan interest income increased $2.2 million to $8.7 million for the six months ended June 30, 2023, from $6.5 million for the six months ended June 30, 2022. For the six months ended June 30, 2023, the average balance of total loans was $10.17 billion, compared with $9.58 billion for the same period in 2022. The average yield on total loans for the six months ended June 30, 2023, increased 134 basis points to 5.18%, from 3.84% for the same period in 2022.
Interest income on held to maturity debt securities decreased $132,000 to $2.4 million for the three months ended June 30, 2023, compared to the same period last year. Average held to maturity debt securities decreased $32.3 million to $380.0 million for the three months ended June 30, 2023, from $412.2 million for the same period last year. Interest income on held to maturity debt securities decreased $360,000 to $4.7 million for the six months ended June 30, 2023, compared to the same period in 2022. Average held to maturity debt securities decreased $38.2 million to $381.9 million for the six months ended June 30, 2023, from $420.1 million for the same period last year.
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Interest income on available for sale debt securities and FHLBNY stock increased $3.0 million to $11.4 million for the three months ended June 30, 2023, from $8.5 million for the three months ended June 30, 2022. The average balance of available for sale debt securities and FHLBNY stock decreased $171.7 million to $1.88 billion for the three months ended June 30, 2023, compared to the same period in 2022. Interest income on available for sale debt securities and FHLBNY stock increased $6.5 million to $22.9 million for the six months ended June 30, 2023, from $16.4 million for the same period last year. The average balance of available for sale debt securities and FHLBNY stock decreased $225.1 million to $1.88 billion for the six months ended June 30, 2023.
The average yield on total securities increased to 2.53% for the three months ended June 30, 2023, compared with 1.74% for the same period in 2022. For the six months ended June 30, 2023, the average yield on total securities increased to 2.52%, compared with 1.59% for the same period in 2022.
Interest expense on deposit accounts increased $30.9 million to $36.4 million for the three months ended June 30, 2023, compared with $5.6 million for the three months ended June 30, 2022. For the six months ended June 30, 2023, interest expense on deposit accounts increased $53.2 million to $64.0 million, from $10.8 million for the same period last year. The average cost of interest-bearing deposits increased to 1.85% and 1.62% for the three and six months ended June 30, 2023, respectively, from 0.27% and 0.26% for the three and six months ended June 30, 2022, respectively. The average balance of interest-bearing core deposits, which consist of total savings and demand deposits, for the three months ended June 30, 2023, decreased $757.7 million to $6.93 billion. For the six months ended June 30, 2023, average interest-bearing core deposits decreased $676.9 million, to $7.05 billion, from $7.73 billion for the same period in 2022. Average time deposit account balances increased $273.3 million to $968.3 million for the three months ended June 30, 2023, from $695.0 million for the three months ended June 30, 2022. For the six months ended June 30, 2023, average time deposit account balances increased $226.4 million to $914.4 million, from $688.0 million for the same period in 2022.
Interest expense on borrowed funds increased $13.0 million to $14.1 million for the three months ended June 30, 2023, from $1.1 million for the three months ended June 30, 2022. For the six months ended June 30, 2023, interest expense on borrowed funds increased $19.3 million to $21.6 million, from $2.3 million for the six months ended June 30, 2022. The average cost of borrowings increased to 3.41% for the three months ended June 30, 2023, from 0.84% for the three months ended June 30, 2022. The average cost of borrowings increased to 3.01% for the six months ended June 30, 2023, from 0.85% for the same period last year. Average borrowings increased $1.13 billion to $1.66 billion for the three months ended June 30, 2023, from $527.6 million for the three months ended June 30, 2022. For the six months ended June 30, 2023, average borrowings increased $904.2 million to $1.44 billion, compared to $538.6 million for the six months ended June 30, 2022.
Provision for Credit Losses. Provisions for credit losses are charged to operations in order to maintain the allowance for credit losses at a level management considers necessary to absorb projected credit losses that may arise over the expected term of each loan in the portfolio. In determining the level of the allowance for credit losses, management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable economic forecasts. The amount of the allowance is based on estimates, and the ultimate losses may vary from such estimates as more information becomes available or later events change. Management assesses the adequacy of the allowance for credit losses on a quarterly basis and makes provisions for credit losses, if necessary, in order to maintain the valuation of the allowance.
The Company recorded a $10.4 million and $16.4 million provision for credit losses on loans for the three and six months ended June 30, 2023, respectively, compared with a provision of $3.0 million and a negative provision of $3.4 million for the three and six months ended June 30, 2022, respectively. The increase in the provision for credit losses for the three and six months ended June 30, 2023 was largely a function of a worsened economic forecast and related deterioration in the projected commercial property price indices over the expected life of the loan portfolio within our CECL model, combined with an increase in total loans outstanding.
Non-Interest Income. Non-interest income totaled $19.4 million for the quarter ended June 30, 2023, a decrease of $1.5 million, compared to the same period in 2022. Fee income decreased $1.6 million to $5.8 million for the three months ended June 30, 2023, compared to the trailing quarter, primarily due to decreases in commercial loan prepayment fees and deposit fee income. Other income decreased $647,000 to $1.3 million for the three months ended June 30, 2023, compared to the quarter ended June 30, 2022, primarily due to a decrease in net gains on sales of SBA loans. Partially offsetting these decreases in non-interest income, insurance agency income increased $997,000 to $3.8 million for the three months ended June 30, 2023, compared to the quarter ended June 30, 2022, largely due to strong retention revenue and new business activity.
For the six months ended June 30, 2023, non-interest income totaled $41.5 million, an increase of $462,000, compared to the same period in 2022. Insurance agency income increased $1.7 million to $8.0 million for the six months ended June 30, 2023, compared to $6.3 million for the same period in 2022, largely due to increases in contingent commissions, retention revenue
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and new business activity. Other income increased $1.4 million to $4.6 million for the six months ended June 30, 2023, compared to $3.1 million for the same period in 2022, mainly due to a $2.0 million gain related to the resolution of certain post-closing conditions following the September 2022 sale of a foreclosed commercial property, combined with an increase in the gains on sales of SBA loans, partially offset by a decrease in net fees on loan-level interest rate swap transactions. Additionally, BOLI income increased $277,000 to $3.0 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to greater equity valuations, partially offset by a decrease in benefit claims recognized. Partially offsetting these increases to non-interest income, fee income decreased $2.2 million to $12.2 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to a decrease in commercial loan prepayment fees, while wealth management income decreased $655,000 to $13.8 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to a decrease in the market value of assets under management.
Non-Interest Expense. For the three months ended June 30, 2023, non-interest expense totaled $64.5 million, an increase of $617,000, compared to the three months ended June 30, 2022. Merger-related expenses totaled $2.0 million for the three months ended June 30, 2023, as a result of transaction costs related to our pending combination with Lakeland. FDIC insurance expense increased $775,000 to $2.1 million for the three months ended June 30, 2023, compared to the same period in 2022, primarily due to an increase in the assessment rate. The Company recorded a $647,000 negative provision for credit losses for off-balance sheet credit exposures, compared to a $973,000 negative provision for the same period in 2022. The $326,000 reduction in the provision benefit was primarily the result of the period-over-period relative changes in line of credit utilization. Partially offsetting these increases in non-interest expense, compensation and benefits expense decreased $2.2 million to $35.3 million for three months ended June 30, 2023, compared to $37.4 million for the same period in 2022. The decrease was principally due to decreases in the accrual for incentive compensation and stock-based compensation, partially offset by an increase in salary expense. Net occupancy expenses decreased $530,000 to $7.9 million for the three months ended June 30, 2023, compared to the same period in 2022, largely due to decreases in depreciation and maintenance expenses.
Non-interest expense totaled $134.0 million for the six months ended June 30, 2023, an increase of $8.2 million, compared to $125.7 million for the six months ended June 30, 2022. The Company recorded a $92,000 provision for credit losses for off-balance sheet credit exposures for the six months ended June 30, 2023, compared to a $3.4 million negative provision for the same period in 2022. The $3.5 million increase in the provision for credit losses for off-balance sheet credit exposures was primarily the result of the period-over-period relative change in line of credit utilization and an increase in projected loss factors as a result of a worsened economic forecast. Merger-related expenses totaled $3.1 million for the six months ended June 30, 2023, as a result of transaction costs related to our pending combination with Lakeland. Other operating expense increased $1.8 million to $21.0 million for the six months ended June 30, 2023, compared to $19.2 million for the six months ended June 30, 2022, primarily due to an increase in consulting fees and additional expenses related to foreclosed commercial real estate owned properties. FDIC insurance expense increased $1.5 million to $4.1 million for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to an increase in the assessment rate. Partially offsetting these increases, net occupancy expense decreased $1.5 million to $16.4 million for the six months ended June 30, 2023, compared to the same period in 2022, mainly due to decreases in maintenance and depreciation expenses. Additionally, compensation and benefits expense decreased $482,000 to $74.0 million for the six months ended June 30, 2023, compared to $74.5 million for the six months ended June 30, 2022, primarily due to decreases in the accrual for incentive and stock-based compensation, partially offset by an increase in salary expense.
Income Tax Expense. For the three months ended June 30, 2023, the Company's income tax expense was $11.6 million with an effective tax rate of 26.7%, compared with $14.3 million with an effective tax rate of 26.8% for the three months ended June 30, 2022. The decrease in tax expense for the three months ended June 30, 2023, compared with the same period last year was largely the result of a decrease in taxable income, while the decrease in the effective tax rate for the three months ended June 30, 2023, compared with the three months ended June 30, 2022, was largely due to a decrease in the proportion of income derived from taxable sources.
For the six months ended June 30, 2023, the Company's income tax expense was $26.1 million with an effective tax rate of 26.4%, compared with $29.6 million with an effective tax rate of 26.2% for the six months ended June 30, 2022. The decrease in tax expense for the six months ended June 30, 2023, compared with the same period last year was largely the result of a decrease in taxable income, while the increase in the effective tax rate for the six months ended June 30, 2023, compared with the prior year period was largely due to non-deductible merger related transaction costs recognized in the current year, partially offset by a decrease in the proportion of income derived from taxable sources.
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Qualitative Analysis. Interest rate risk is the exposure of a bank’s current and future earnings and capital arising from adverse movements in interest rates. The guidelines of the Company’s interest rate risk policy seek to limit the exposure to changes in
54

interest rates that affect the underlying economic value of assets and liabilities, earnings and capital. To minimize interest rate risk, the Company generally sells all 20- and 30-year fixed-rate residential mortgage loans at origination. The Company retains residential fixed rate mortgages with terms of 15 years or less and biweekly payment residential mortgages with a term of 30 years or less. Commercial real estate loans generally have interest rates that reset in five years, and other commercial loans such as construction loans and commercial lines of credit reset with changes in the Prime rate, the Federal Funds rate, LIBOR or SOFR. Investment securities purchases generally have maturities of five years or less, and mortgage-backed securities have weighted average lives between three and five years.
The Asset/Liability Committee meets at least monthly, or as needed, to review the impact of interest rate changes on net interest income, net interest margin, net income and the economic value of equity. The Asset/Liability Committee reviews a variety of strategies that project changes in asset or liability mix and the impact of those changes on projected net interest income and net income.
The Company’s strategy for liabilities has been to maintain a stable core-funding base by focusing on core deposit account acquisition and increasing products and services per household. The Company’s ability to retain maturing time deposit accounts is the result of its strategy to remain competitively priced within its marketplace. The Company’s pricing strategy may vary depending upon current funding needs and the ability of the Company to fund operations through alternative sources, primarily by accessing short-term lines of credit with the FHLBNY during periods of pricing dislocation.
Quantitative Analysis. Current and future sensitivity to changes in interest rates are measured through the use of balance sheet and income simulation models. The analysis captures changes in net interest income using flat rates as a base, a most likely rate forecast and rising and declining interest rate forecasts. Changes in net interest income and net income for the forecast period, generally twelve to twenty-four months, are measured and compared to policy limits for acceptable change. The Company periodically reviews historical deposit re-pricing activity and makes modifications to certain assumptions used in its income simulation model regarding the interest rate sensitivity of deposits without maturity dates. These modifications are made to more closely reflect the most likely results under the various interest rate change scenarios. Since it is inherently difficult to predict the sensitivity of interest-bearing deposits to changes in interest rates, the changes in net interest income due to changes in interest rates cannot be precisely predicted. There are a variety of reasons that may cause actual results to vary considerably from the predictions presented below which include, but are not limited to, the timing, magnitude, and frequency of changes in interest rates, interest rate spreads, prepayments, and actions taken in response to such changes.
Specific assumptions used in the simulation model include:
•Parallel yield curve shifts for market rates;
•Current asset and liability spreads to market interest rates are fixed;
•Traditional savings and interest-bearing demand accounts move at 10% of the rate ramp in either direction;
•Retail Money Market and Business Money Market accounts move at 25% and 75% of the rate ramp in either direction respectively, subject to certain interest rate floors; and
•Higher-balance demand deposit tiers and promotional demand accounts move at 50% to 75% of the rate ramp in either direction, subject to certain interest rate floors.
The following table sets forth the results of a twelve-month net interest income projection model as of June 30, 2023 (dollars in thousands):
Change in interest rates (basis points) - Rate RampNet Interest Income
Dollar AmountDollar ChangePercent Change
-200$401,744 $(3,242)(0.8)%
-100403,524 (1,462)(0.4)
Static404,986 — — 
+100406,166 1,180 0.3 
+200406,954 1,968 0.5 
The interest rate risk position of the Company remains fairly neutral. As a result, the preceding table indicates that, as of June 30, 2023, in the event of a 200 basis point increase in interest rates, whereby rates ramp up evenly over a twelve-month period, net interest income would increase 0.5%, or $2.0 million. In the event of a 200 basis point decrease in interest rates, whereby rates ramp downward evenly over a twelve-month period, net interest income would decrease 0.8%, or $3.2 million over the same period. In this downward rate scenario, rates on deposits have a repricing floor of zero.

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Another measure of interest rate sensitivity is to model changes in economic value of equity through the use of immediate and sustained interest rate shocks. The following table illustrates the result of the economic value of equity model as of June 30, 2023 (dollars in thousands):
  Present Value of EquityPresent Value of Equity as Percent of Present Value of Assets
Change in interest rates (basis points)Dollar AmountDollar ChangePercent
Change		Present Value
 Ratio		Percent
Change
-200$1,752,473 $(59,795)(3.3)%12.3 %(8.0)%
-1001,794,579 (17,689)(1.0)12.9 (3.4)
Flat1,812,268 — — 13.4 — 
+1001,821,117 8,849 0.5 13.8 3.0 
+2001,826,912 14,644 0.8 14.1 5.8 
The preceding table indicates that as of June 30, 2023, in the event of an immediate and sustained 200 basis point increase in interest rates, the present value of equity is projected to increase 0.8%, or $14.6 million. If rates were to decrease 200 basis points, the present value of equity would decrease 3.3%, or $59.8 million.
Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes in net interest income requires the use of certain assumptions regarding prepayment and deposit decay rates, which may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. While management believes such assumptions are reasonable, there can be no assurance that assumed prepayment rates and decay rates will approximate actual future loan prepayment and deposit withdrawal activity. Moreover, the net interest income table presented assumes that the composition of interest sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or repricing of specific assets and liabilities. Accordingly, although the net interest income table provides an indication of the Company’s interest rate risk exposure at a particular point in time, such measurement is not intended to and does not provide a precise forecast of the effect of changes in market interest rates on the Company’s net interest income and will differ from actual results.
 

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Item 4.
CONTROLS AND PROCEDURES.
Under the supervision and with the participation of management, including the Principal Executive Officer and the Principal Financial Officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) were evaluated at the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective.

PART II—OTHER INFORMATION
 
Item 1.
Legal Proceedings
The Company is involved in various legal actions and claims arising in the normal course of business. In the opinion of management, these legal actions and claims are not expected to have a material adverse impact on the Company’s financial condition.
Item 1A.
Risk Factors
The risk factors that were previously disclosed in the Company’s Annual Report on Form 10K for the year ended December 31, 2022, were supplemented by the Company in its Form 10-Q for the quarter ended March 31, 2023.

Item 2.
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
ISSUER PURCHASES OF EQUITY SECURITIES
Period(a) Total Number of Shares
Purchased		(b) Average
Price Paid per Share
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
(d) Maximum Number of Shares that May Yet Be Purchased under the Plans or Programs (1)
April 1, 2023 through April 30, 202338 $18.42 38 1,062,832 
May 1, 2023 through May 31, 2023208 15.15 208 1,062,624 
June 1, 2023 through June 30, 2023— — — 1,062,624 
Total246 15.66 246 
(1) On December 28, 2021, the Company’s Board of Directors approved the purchase of up to 3,900,000 shares of its common stock under a ninth general repurchase program to commence upon completion of the eighth repurchase program. The repurchase program has no expiration date.
Item 3.
Defaults Upon Senior Securities.
Not Applicable 
Item 4.
Mine Safety Disclosures
Not Applicable
Item 5.
Other Information.
(a) During the three months ended June 30, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement," as that term is used in SEC regulations.
(b) The information below is reported in lieu of information that would be reported pursuant to a Current Report on Form 8-K filed with the Commission during the period under Item 5.02.
On August 2, 2023, Provident Financial Services, Inc. (the “Company”), Provident Bank (the “Bank”) and John Kuntz, Senior Executive Vice President, General Counsel and Corporate Secretary of the Company (the “Executive”), entered into a Transition Agreement with General Release of Claims (the “Transition Agreement”) in connection with the transaction
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contemplated under the Agreement and Plan of Merger dated September 26, 2022 by and among the Company, NL 239 Corp. and Lakeland Bancorp, Inc. (the “Merger”) and related restructuring of the Company’s management team.
The Transition Agreement provides that the Executive’s employment with the Company and Bank will terminate as part of the management restructuring on the later of January 31, 2024 or 90 days after the closing date of the Merger (the “Separation Date”), unless (i) the Executive resigns his employment or dies prior to the Separation Date, or (ii) the Company or Bank terminates the Executive’s employment due to Disability (as defined in the Transition Agreement) or for Cause (as defined in the Transition Agreement) prior to the Separation Date (the Separation Date, or if applicable, Executive’s earlier termination date, is referred to as his “Termination Date”).
Pursuant to the Transition Agreement, as of the closing date of the merger (the “Transition Date”) and ending on the Termination Date, the Executive will serve as Special Advisor to the Company’s Chief Executive Offer in exchange for an annualized base salary of $550,000. In addition, unless the Executive dies, has his employment terminated due to Disability, resigns his employment or is terminated for Cause prior to the Separation Date, and in exchange for a release of claims, post-employment restrictions in favor of the Company and other valuable consideration, the Executive will receive a lump sum bonus payment of $875,000, less required withholding (the “Bonus”), in consideration of his contributions toward the successful integration of the pending Merger. If the Executive’s employment terminates for any reason prior to the closing date of the Merger, Executive shall not be entitled to the Bonus. If Executive dies or has his employment terminated due to Disability prior to the Separation Date, the Executive or his estate, as applicable, will receive a prorated amount of the Bonus.
Pursuant to the Transition Agreement, unless the Executive dies, has his employment terminated due to Disability, resigns his employment or is terminated for Cause prior to the Separation Date, and in exchange for a release of claims, post-employment restrictions in favor of the Company and other valuable consideration, the Executive will (i) receive a lump sum severance cash payment of $1,650,000, less required withholding (the “Severance”), and (ii) in accordance with the terms of the Company’s equity plan, the Executive’s continued service as a non-employee director of Beacon Trust Company shall entitle the Executive to continued vesting of all unvested and outstanding equity awards as of the Termination Date. If the Executive’s employment terminates for any reason prior to the closing date of the Merger, Executive shall not be entitled to the Severance.
This summary of the Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the text of the Agreement, included as Exhibit 10.1 to this filing.


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Item 6.
Exhibits.
The following exhibits are filed herewith:
2.1
3.1
3.2
4.1
10.1
31.1
31.2
32
101
The following financial statements from the Company’s Quarterly Report to Stockholders on Form 10-Q for the quarter ended June 30, 2023, formatted in iXBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Financial Condition, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholder’s Equity, (v) the Consolidated Statements of Cash Flows and (vi) the Notes to Consolidated Financial Statements.
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Labels Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, has been formatted in iXBRL.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
PROVIDENT FINANCIAL SERVICES, INC.
Date:August 8, 2023By:/s/ Anthony J. Labozzetta
Anthony J. Labozzetta
President and Chief Executive Officer (Principal Executive Officer)
Date:August 8, 2023By:/s/ Thomas M. Lyons
Thomas M. Lyons
Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Date:August 8, 2023By:/s/ Adriano M. Duarte
Adriano M. Duarte
Executive Vice President and Chief Accounting Officer

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1 TRANSITION AGREEMENT WITH GENERAL RELEASE OF CLAIMS This Transition Agreement with General Release of Claims (this “Agreement”) is being entered into by and between Provident Bank (the “Bank”), Provident Financial Services, Inc., the holding company for the Bank (“Company”), and John Kuntz (“Executive”). The Bank, Company and Executive may hereafter be referred to individually as a “Party” or collectively as the “Parties.” WHEREAS, Executive is currently serving as Senior Executive Vice President, General Counsel and Corporate Secretary of the Company, Senior Executive Vice President and Chief Administrative Officer of the Bank and a director of several of the Bank’s subsidiaries; WHEREAS, in connection with the transaction contemplated under the Agreement and Plan of Merger dated September 26, 2022 by and among the Company, NL 239 Corp. and Lakeland Bancorp, Inc. (“Lakeland”) (the “Merger”) the Company is restructuring its management team; WHEREAS, Executive’s employment with the Company and the Bank will terminate as part of the management restructuring, effective on the later of January 31, 2024 or 90 days after the closing date of the Merger (“Separation Date”), unless (i) the Executive resigns his employment for any reason or dies prior to the Separation Date, or (ii) the Company or the Bank terminates Executive’s employment due to Executive’s Disability (as defined in Section 2 of this Agreement) or for Cause (as defined in Section 2 of this Agreement) prior to the Separation Date (the Separation Date or, if applicable, Executive’s earlier termination date, is referred to as his (“Termination Date”); WHEREAS, on the closing date of the Merger (the “Transition Date”), Executive will transition out of his role as Senior Executive Vice President of the Company and Senior Executive Vice President and Chief Administrative Officer of the Bank and into the role of Special Advisor to the Company Chief Executive Officer; WHEREAS, Executive will serve as Special Advisor to the Company Chief Executive Officer for the period commencing on the Transition Date and ending on his Termination Date, referred to herein as the “Transition Period;” WHEREAS, the Executive has unique knowledge and skills relating to the business and legal operations of the Company, Bank and the subsidiaries of the Company and the Bank and his presence through the Separation Date is needed with critical merger integration issues and the smooth transition of leadership; WHEREAS, in addition, the Executive will continue to serve as a director of Beacon Trust Company, a subsidiary of the Bank, and Beacon Investment Advisory Services, Inc., a subsidiary of Beacon Trust Company (together “Beacon”) through the later of the Separation Date or March 31, 2024, unless the Company or the Bank terminates Executive’s employment due to Executive’s Disability or for Cause, or Executive dies, prior to the Separation Date; WHEREAS, the purpose of this Agreement is, in part, to memorialize the agreement between the Parties and to resolve any and all claims, disputes and other matters that may exist between them, if any, whether they have been raised or not; and. WHEREAS, the Parties hereto acknowledge and agree that the payments and benefits provided for in Sections 2 and 3 of this Agreement shall not be provided to Executive if the closing of the Merger does not occur;

 
2 NOW, THEREFORE, for and in consideration of the mutual promises contained herein, and for other good and sufficient consideration, receipt of which is hereby acknowledged, and intending to be legally bound, the Parties agree as follows: 1. Transition Period; Separation from Service and Accrued Benefits. (a) Executive shall separate from his employment with the Company and the Bank on his Termination Date. (b) Through the closing date of the Merger, Executive shall continue to receive his rate of base salary in effect on the date this Agreement is executed, unless increased by the Company or the Bank. If the closing of the Merger occurs in 2023, Executive’s cash incentive target in the Executive Annual Incentive Plan (“AIP”) for 2023 will be prorated based only on Executive’s employment with the Company during the period between January 1, 2023 and the closing date of the Merger. If the closing of the Merger occurs in 2024, Executive’s cash incentive target in the AIP for 2024 will be prorated based only on Executive’s employment with the Company during the period between January 1, 2024 and the closing date of the Merger. Actual payment under the AIP (if any) will be subject to the terms and payment schedule under the AIP. Executive will not participate in the AIP for any period after the closing of the Merger. (c) During the Transition Period, in his role as Special Advisor to the Company Chief Executive Officer, Executive shall receive an annualized base salary of $550,000 and work diligently to: (i) transition his job knowledge, duties and responsibilities at the Bank and Company level to his successors and (ii) perform other job assignments suitable for a Special Advisor to the Company, as directed by the Company’s CEO. (d) Except as provided in Section 1(b) above, nothing in this Agreement changes the Executive’s rights to participate in the AIP, The Provident Bank Employee Stock Ownership Plan (“ESOP”), the Provident Bank 401(k) Plan (“401(k) Plan”), The Provident Bank Amended and Restated Non-qualified Supplemental Defined Contribution Plan (“NQDC Plan”), any non-qualified equity-based plan or program maintained by the Company for the benefit of senior executives of the Company or the Bank (“Equity Plan”) or employer-sponsored health plan while performing services for the Bank, Company or a subsidiary of the Bank or the Company, in accordance with the terms and conditions of the respective plans and arrangements. (e) The Parties agree that: (i) Executive shall receive his base salary through his Termination Date, less all withholdings and deductions required by law, in accordance with the Bank’s normal pay procedures; (ii) except as otherwise provided in this Agreement, Executive will be entitled to receive all perquisites currently provided to the senior executive management team including, but not limited to, a car allowance at a rate no less than his current rate and an annual medical benefit through his Termination Date; (iii) Executive shall be entitled to any fully vested and non-forfeitable benefits under the terms and conditions of applicable benefit plans or programs as of his Termination Date; and (iv) Executive shall be reimbursed for approved expenses that Executive has submitted in Executive’s final expense report, if any, and that the Company determines are reimbursable under applicable Company policies and procedures, and Executive acknowledges that the Company does not owe him any other expense reimbursements. Executive’s final expense report must be submitted to the Company within three (3) business days following his Termination Date. (f) As of his Termination Date, all base salary payments to Executive will cease and any benefits Executive had as of his Termination Date under Company or Bank provided benefit plans, programs, or practices will terminate in accordance with the terms of the respective arrangements, except as required by federal or state law or as otherwise specifically set forth in this Agreement. Other than the

 
3 accrued obligations noted above, Executive will not be eligible for, nor shall he have a right to receive, any payments or benefits from the Company or the Bank following his separation from service, other than as set forth in his equity award agreements, any tax-qualified or non-qualified retirement plan sponsored by the Bank or the Company in which the Executive is a participant as of his Termination Date. Executive acknowledges and agrees that the payments and benefits referred to in Section 1(e) of this Agreement represent all compensation and benefits due and owing to Executive as a result of Executive’s service with the Bank and the Company. Executive further agrees that the additional benefits referred to in Sections 2 and 3 are consideration for Executive’s promises contained in this Agreement and that the additional benefits are above and beyond any wages, salary, or other sums or benefits to which Executive is entitled from the Company and the Bank under the terms of Executive’s employment or any other source of entitlement. 2. Merger/Integration Bonus. (a) Unless the Executive dies, has his employment terminated due to Disability (as defined below), resigns for any reason, or is terminated for Cause (as defined below) prior to the Separation Date, and in exchange for (i) Executive executing, delivering and not revoking this Agreement in accordance with the provisions of Section 10 herein, (ii) Executive executing, delivering and not revoking the Supplemental Release attached as Exhibit A in accordance with the provisions of Section 13 herein, (iii) Executive not breaching the terms of said arrangements, and (iv) Executive’s compliance with the Restrictive Covenants (as defined in Section 8 herein), the Company or the Bank shall pay Executive a lump sum bonus payment in consideration of Executive’s contributions to the successful integration of the Merger, of $875,000, less all withholdings and deductions required by law, payable on the later of (y) the Bank’s first regularly scheduled payroll date that falls at least five (5) business days following the effective date of the Supplemental Release (as defined in Section 13 below) or (z) five (5) business days following the Separation Date. (b) In the event that Executive’s employment with the Company terminates for any reason prior to the closing date of the Merger, Executive shall not be entitled to any payments under this Section 2. Notwithstanding any provision in this Agreement to the contrary, if Executive dies or has his employment terminated due to Disability prior to the Separation Date, upon satisfaction of all conditions set forth in Section 2 above by Executive or if applicable his estate (in the case of Executive’s death), the Company or the Bank shall pay Executive or if applicable his estate a prorated merger/integration bonus for the period between the Transition Date and the date of death or termination due to Disability, with the denominator in said calculation being the number of days between the Transition Date and the later of January 31, 2024 or 90 days after the closing of the Merger, and the numerator in said calculation being the number of days between the Transition Date and the date of death or date of termination due to Disability. (c) For the avoidance of doubt in this Section 2, if the Company chooses to terminate Executive after the Transition Date but prior to the Separation Date without Cause, Executive shall be entitled to all payments and benefits under Sections 1 and 2 of this Agreement as if his employment had continued until the Separation Date, provided (i) with respect to the payments and benefits under Section 1, Executive executes, delivers and does not revoke this Agreement as provided for in this Agreement, and (ii) with respect to the payments and benefits under Section 2, Executive also executes, delivers and does not revoke the Supplemental Release as provided for in this Agreement. (d) For purposes of this Agreement, “Disability” and “Cause” shall have the meanings set forth in Article 8 of The Provident Financial Services, Inc. 2019 Long-Term Equity Incentive Plan.

 
4 3. Severance Benefits. (a) Unless the Executive dies, has his employment terminated due to Disability, resigns for any reason, or is terminated for Cause prior to the Separation Date, and in exchange for (i) Executive executing, delivering and not revoking this Agreement in accordance with the provisions of Section 10 herein, (ii) Executive executing, delivering and not revoking the Supplemental Release attached as Exhibit A in accordance with the provisions of Section 13 herein, (iii) Executive not breaching the terms of said arrangements, and (iv) Executive’s compliance with the Restrictive Covenants (as defined in Section 8 herein),the Company or the Bank shall pay Executive a lump sum severance cash payment of $1,650,000, less all withholdings and deductions required by law, payable on the later of (y) the Bank’s first regularly scheduled payroll date that falls at least five (5) business days following the effective date of the Supplemental Release (as defined in Section 13 below) or (z) five (5) business days following the Separation Date. (b) In accordance with the terms of the Company’s Equity Plan, Executive’s continued service as a non-employee director of Beacon, shall entitle the Executive to continued vesting of all unvested and outstanding equity awards as of his Termination Date. (c) In the event that Executive’s employment with the Company terminates for any reason prior to the closing date of the Merger, Executive shall not be entitled to any payments and benefits under this Section 3. (d) For the avoidance of doubt in this Section 3, if the Company chooses to terminate Executive after the Transition Date but prior to the Separation Date without Cause, Executive shall be entitled to all payments and benefits under Sections 1 and 3 of this Agreement as if his employment had continued until the Separation Date, provided (i) with respect to the payments and benefits under Section 1, Executive executes, delivers and does not revoke this Agreement as provided for in this Agreement, and (ii) with respect to the payments and benefits under Section 3, Executive also executes, delivers and does not revoke the Supplemental Release as provided for in this Agreement. 4. General Release. In consideration of the undertakings of the Bank and the Company, as contained in this Agreement, Executive, on behalf of himself and his heirs, executors, administrators, successors and assigns (collectively, “Executive”) irrevocably and unconditionally releases the Company and the Bank, and current, past and future parents, subsidiaries, divisions and affiliates of the Company and the Bank, and each of their directors, officers, employees, shareholders, principals, agents, independent contractors, benefit plans, insurers, and re-insurers, and each of their heirs, successors and assigns (collectively, “Releasees”), of and from any and all claims, promises, damages, and actions of any nature, whether in tort, contract, by statute, or on any other basis, whether in law or in equity, whether known or unknown, (collectively, “Claims”), which Executive may have against them arising prior to the Effective Date of the Agreement as defined in Section 10 of this Agreement. Without in any way limiting the foregoing general release, this release includes all Claims arising out of Executive’s employment with the Company and the Bank, including the terms, conditions, and termination of his employment with the Company and the Bank, including Claims for breach of express or implied contract, wrongful termination, constructive termination, retaliation, whistleblowing, discrimination, harassment, hostile working environment, abusive discharge, denial of or interference with leave, defamation, invasion of privacy, violation of public policy, interference with contractual relationships, and intentional or negligent infliction of emotional distress, as well as Claims under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act

 
5 of 1991, Section 1981 of the Civil Rights Act of 1866, the Americans with Disabilities Act, the Rehabilitation Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Worker Adjustment and Retraining Notification Act, the Fair Credit Reporting Act, the Employee Retirement Income Security Act, the Genetic Information Nondiscrimination Act, the Health Insurance Portability and Accountability Act, the Occupational Safety and Health Act, the Equal Pay Act, the Uniformed Services Employment and Re-employment Act, the False Claims Act (including the qui tam provision thereof), the Consolidated Omnibus Budget Reconciliation Act, The Dodd-Frank Wall Street Reform and Consumer Protection Act, the Electronic Communications Privacy Act (including the Stored Communications Act), the New Jersey Law Against Discrimination, the New Jersey Family Leave Act, the New Jersey Conscientious Employee Protection Act, the New Jersey Worker Freedom from Employer Intimidation Act, the New Jersey Wage and Hour Laws, the New Jersey Wage Payment Law, the New Jersey Earned Sick Leave Law, the New Jersey Civil Rights Act, the New Jersey Millville-Dallas Airmotive Plant Job Loss Notification Act, the New Jersey Statutory Provision Regarding Retaliation/Discrimination for Filing a Workers’ Compensation Claim, the New Jersey Smokers’ Rights Law, the New Jersey Equal Pay Act, the New Jersey Genetic Privacy Act, the New Jersey Fair Credit Reporting Act, the New Jersey False Claims Act, the New Jersey mini-COBRA law, the New Jersey Constitution, as well as any Claims under any other federal, state or local statute, ordinance, order or regulation governing the rights of employees and employers. Without in any way limiting the foregoing general release, this release also includes all claims for compensatory damages, punitive damages, attorney’s fees, salary, bonuses, incentive payments, deferred compensation, and any payments described in the Change in Control Agreement dated December 16, 2015, by and between the Company, the Bank, and Executive, or other monies due. Except as may be necessary to enforce this Agreement, and to the fullest extent permitted by law, Executive agrees not to permit, authorize, initiate, join or continue any lawsuit, administrative charges or complaints, arbitrations or proceedings (collectively, “Proceedings”) against any of the Releasees based in whole or in part on any Claim covered by this release. Notwithstanding the generality of the foregoing Release, nothing herein constitutes a release or waiver by Executive of, or prevents Executive from making or asserting: (i) any claim or right Executive may have under COBRA; (ii) any claim or right Executive may have for unemployment insurance or workers’ compensation benefits (other than for retaliation under workers’ compensation laws); (iii) any claim to vested benefits under the written terms of a qualified defined benefit or defined contribution Executive pension plan, non-qualified deferred compensation plan or equity incentive plan in which Executive participated in as of his Termination Date; (iv) any claim for indemnity under the Company’s certificate of incorporation and bylaws or to coverage under any directors’ and officers’ insurance policies; (v) any medical claim incurred during Executive’s employment that is payable under applicable medical plans or an employer-insured liability plan; (vi) any claim or right that may arise after the Effective Date of this Agreement; or (vii) any claim or right that is not otherwise able to be waived under applicable law. In addition, nothing herein shall prevent Executive from filing a charge or complaint with the Equal Employment Opportunity Commission (“EEOC”) or similar federal or state fair employment practices agency or interfere with Executive’s ability to participate in any investigation or proceeding conducted by such agency; provided, however, that Executive hereby waives any right to recover monetary damages or any other form of personal relief from the Releasees to the extent any such charge, complaint, investigation or proceeding asserts a claim subject to the release in this Agreement. Executive represents and warrants that to the extent it is determined that any aspect or portion of this Agreement, including any aspect or portion of the release in this Agreement, requires the approval of any court, agency or other body to be effective, that he will cooperate fully with the Company to secure

 
6 that approval, and if requested will join in and support any such request for approval. The Parties agree that Paragraph 11(f) will apply to the cooperation required by this Paragraph. 5. No Admission. The Parties agree that nothing contained in this Agreement shall constitute or be treated as an admission of liability or wrongdoing by either of them or any of the other Releasees. 6. Confidential and/or Proprietary Information. Executive acknowledges that during his employment, Executive learned (and/or may learn) and came into contact with (and/or will come in contact with), certain confidential and/or proprietary information and trade secrets of the Company and the Bank and their respective affiliates and subsidiaries (collectively, “Confidential Information”). Executive acknowledges that Confidential Information includes, without limitation, trade secrets, client lists and information, personnel information, financial data, long range or short-range plans, or other data and information concerning the Company or the Bank or the affairs that the Company or the Bank has not previously disclosed to the public, and any confidential information of others provided to the Company or the Bank. Confidential Information includes information in any form, whether tangible or intangible, including without limitation all notes, records, drawings, handbooks, manuals, policies, contracts, memoranda, other documents, software, electronic files, discs, drives, other electronic data and tapes. Executive agrees that Confidential Information is and shall remain the exclusive property of the Company and the Bank, and Executive shall not disclose to any person or entity, use for his own benefit, copy, or make notes of any Confidential Information, except as and only to the extent expressly authorized by an officer of the Company or the Bank (other than Executive), in writing. Executive acknowledges that a breach or threatened breach of the terms of this confidentiality provision by Executive would result in material and irreparable injury to the Company and the Bank, and that it would be difficult or impossible to establish the full monetary value of such damage. Therefore, in addition to any other legal or equitable relief a court may award, the Company and the Bank shall be entitled to injunctive relief in the event of Executive breaches or threatens to breach any of the terms contained in this provision concerning Confidential Information. Notwithstanding the foregoing, notice is hereby provided that, in accordance with the Defend Trade Secrets Act of 2016, Executive is immune from liability and shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret (as that term is defined in the Defend Trade Secrets Act of 2016) that is made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney if such disclosure (a) is made solely for the purpose of reporting or investigating a suspected violation of law or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. 7. Return of Information and Property. No later than the Termination Date, or earlier upon the request of the Company, Executive agrees to promptly return and represent he has returned to the Company all information, property, and supplies belonging to the Company, including without limitation any keys, laptop, computer and related equipment, security card and the originals and all copies of all files, materials, or documents (whether in tangible or electronic form) containing proprietary or Confidential Information or otherwise relating to the Company’s business, as well as any log-in credentials needed to access websites or accounts relating to the Company’s business. 8. Restrictive Covenants. As a material inducement for the Parties to enter into this Agreement, the Parties agree as follows: (a) Non-disparagement. Executive will refrain from taking actions or making statements, written or oral, in any medium (including social media) which disparage or defame the goodwill, character, competence, or reputation of the Company or the Bank or their current, past and future

 
7 directors, officers, employees, shareholders, principals, agents, or independent contractors. Executive understands that this non-disparagement provision does not apply on occasions when Executive is subpoenaed or ordered by a court or other governmental authority to testify or give evidence and must, of course, respond truthfully, to conduct otherwise protected by the Sarbanes-Oxley Act in the context of enforcing the terms of this Agreement or other rights, powers, privileges, or claims not released by this Agreement. Executive also understands that the foregoing non-disparagement provision does not apply on occasions when Executive provides truthful information in good faith to any federal, state, or local governmental body, agency, or official investigating an alleged violation of any antidiscrimination or other employment-related law or otherwise gathering information or evidence pursuant to any official investigation, hearing, trial, or proceeding. Nothing in this non-disparagement provision is intended in any way to intimidate, coerce, deter, persuade, or compensate Executive with respect to providing, withholding, or restricting any communication whatsoever to the extent prohibited under 18 U.S.C. §§ 201, 1503, or 1512 or under any similar or related provision of state or federal law. In addition, nothing in this provision is intended to require Executive to provide notice to the Company or its attorneys before reporting any possible violations of federal law or regulation to any governmental agency or entity (“Whistleblower Disclosures”), and Executive is not required to notify the Company or its attorneys that Executive has made any such Whistleblower Disclosures. Subject to these same limitations, the Company and the Bank agree that each entity will not cause or condone the disparagement of Executive through its officers, directors, employees or shareholders. (b) Employee Non-solicitation. Executive agrees that, for a period of twelve (12) months following the Termination Date he will not, directly or indirectly: (i) solicit or induce, or attempt to solicit or induce, anyone who is an employee of the Company or the Bank as of the Termination Date to leave the employ of the Company or the Bank; (ii) hire or attempt to hire any employee of the Company or the Bank to work for Executive or any other person, corporation, partnership, limited liability company or other business entity other than general solicitations of employment not directly targeting employees of the Company or the Bank (such as through general advertisements, search firms, etc.); or (iii) assist any person, corporation, partnership, limited liability company or other business entity, to hire or attempt to hire any employee of the Company or the Bank. (c) Customer Non-solicitation. Executive agrees that, for a period of twelve (12) months following the Termination Date, he will not, directly or indirectly, solicit or induce, or attempt to solicit or induce, any individuals or businesses that were customers of the Company or the Bank as of the Termination Date to do business in competition with the Company or the Bank. (d) Remedies. Executive acknowledges that a breach or threatened breach of the terms of this Section by Executive would result in material and irreparable injury to the Company and the Bank, and that it would be difficult or impossible to establish the full monetary value of such damage. Therefore, in addition to any other legal or equitable relief a court may award, the Company and the Bank shall be entitled to injunctive relief in the event of Executive breaches or threatens to breach any of the terms contained in this Section. 9. Acknowledgment and Affirmations. (a) Executive affirms that Executive has not filed, or caused to be filed, and presently is not a party to any claim against Releasees (excepting any Whistleblower Disclosures that Executive is not legally required to disclose) and that no such filings or claims are contemplated. (b) Executive also affirms that Executive has received all compensation, wages, bonuses, commissions, and/or benefits which are due and payable as of the date Executive signs this Agreement.

 
8 (c) Executive affirms that Executive has been granted any leave to which Executive was entitled from the Company or the Bank under the Family and Medical Leave Act or related state or local leave or disability accommodation laws. (d) Executive further affirms that Executive has no known workplace injuries or occupational diseases. (e) Executive also affirms that Executive has not misappropriated or improperly disclosed any financial, proprietary or confidential information of the Company or the Bank and will continue to maintain the confidentiality of such information consistent with the Company or the Bank’s policies, Executive’s agreement(s) with the Company or the Bank and/or any applicable common law. This Agreement does not limit Executive from providing any documents to the U.S. Securities and Exchange Commission as part of a whistleblower action and/or a report of possible violations of any federal securities law. (f) Executive further affirms that Executive has not been retaliated against for reporting any allegations of wrongdoing by the Company or the Bank, its officers or any other Releasees identified in this Agreement, including any allegations of corporate fraud. (g) Executive affirms that he is not currently receiving, has not received in the past, will not have received at the time of payment pursuant to this Agreement, is not entitled to, is not eligible for, and has not applied for or sought Social Security Disability benefits. In the event any statement in the first sentence of this Section is incorrect (for example, but not limited to, if Executive is a Social Security Disability beneficiary, etc.), the following sentences of this Section apply. Executive affirms, covenants, and warrants he has made no claim for illness or injury against, nor is he/she aware of any facts supporting any claim against, Releasees under which they could be liable for medical expenses incurred by him before or after the execution of this Agreement. Furthermore, he is aware of no medical expenses which Medicare has paid and for which Releasees are or could be liable now or in the future. Executive agrees and affirms that, to the best of his knowledge, no liens of any governmental entities, including those for Medicare conditional payments, exist. Executive will indemnify, defend, and hold Releasees harmless from Medicare claims, liens, damages, conditional payments, and rights to payment, if any, including attorneys’ fees, and he/she further agrees to waive any and all future private causes of action for damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) et seq. 10. Consideration Period. Since Executive is 40 years of age or older, he is hereby informed that he has or may have specific rights and/or claims under the ADEA. (a) Executive acknowledges that he has been given at least forty-five (45) days from the date he received this Agreement to consider this Agreement, and that he is advised to consult with an attorney of his own choosing prior to signing this Agreement. If Executive wishes to accept the terms of this Agreement, he must sign and return the Agreement to Carolyn Powell, Chief Human Resources Officer, Provident Bank, 111 Wood Ave. South, Iselin, NJ 08830 via email at Carolyn.Powell@Provident.Bank or by overnight or hand delivery. (b) Executive is hereby advised that he may revoke this Agreement for a period of seven (7) days after he signs it, and this Agreement, including the release provided in Section 4 of this Agreement, shall not be effective or enforceable until the expiration of such seven (7) day revocation period. The forty-five (45) day review period will not be affected or extended by any revisions, whether material or immaterial, that have been, or in the future might be made to this Agreement.

 
9 (c) Executive acknowledges that he has carefully read and fully understands all of the provisions of this Agreement, and he knowingly and voluntarily agrees to all of the terms set forth in this Agreement. (d) In entering into this Agreement, Executive is not relying on any representation, promise or inducement made by the Releasees or their attorneys with the exception of those promises described in this document. (e) If Executive signs this Agreement prior to the end of the forty-five (45) day review period, he has done so voluntarily; and has seven (7) calendar days after executing this Agreement to revoke it by providing written notice of revocation either via email to or by overnight delivery to no later than 11:59 p.m. on the seventh (7th) calendar date after Executive has signed this Agreement. Executive further understands that if he revokes the Agreement, it shall be null and void and of no force or effect on either Executive or the Company or the Bank. This Agreement is not effective or enforceable until after the seven (7)-day period expires without revocation (the “Effective Date”), and the Company’s promises under this Agreement will arise only after this time. Further, as detailed in Section 13 below, the Company’s obligation to provide Executive with the benefits described in Sections 2 and 3 of this Agreement will arise only after the Supplemental Release is effective. 11. Additional Provisions. (a) The Parties represent and acknowledge that in executing this Agreement they do not rely and have not relied upon any representation or statement, other than those contained in this Agreement, made by the other Party or their respective agents, representatives or attorneys with regard to the subject matter, basis or effect of this Agreement or otherwise. This Agreement contains the entire agreement between the Parties relating to the subject matter of this Agreement and may not be altered or amended except by an instrument in writing signed by all Parties. (b) Neither the waiver by either Party of a breach of or default under any of the provisions of this Agreement, nor the failure of such Party, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder shall be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any provisions, rights or privileges hereunder. If any part, term or provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, unenforceable or otherwise in conflict with law, the validity of the remaining parts, terms or provisions shall not be affected, provided that if a court finds that the release language is unenforceable, the Parties shall, in good faith, rewrite (or, if they cannot agree, ask the court to rewrite) the offending language to cure the defect in a reasonable manner that maintains the intended status quo as closely as possible. This Agreement shall extend to, be binding upon, and inure to the benefit of the Parties, and their respective successors, heirs, and assigns, provided that this Agreement may not be assigned by Executive without the Company’s written consent. (c) This Agreement shall be governed and conformed in accordance with the laws of the State of New Jersey except as otherwise expressly provided herein. In the event of a breach of any provision of this Agreement, either Party may institute an action specifically to enforce any term or terms of this Agreement and/or to seek any damages for the breach. Should any provision of this Agreement be declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, excluding the general release language, such provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect. If the general release language is found to be illegal or unenforceable, Executive agrees to execute a binding replacement release.

 
10 (d) This Agreement may be executed electronically and may be executed in counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same written agreement, which shall be binding and effective as to all Parties. (e) The language of all parts of this Agreement shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against either of the Parties. The Whereas recitals in this Agreement are intended to be material terms of this Agreement. There shall be no presumption or construction against the party who caused this Agreement to be drafted. (f) Following the Termination Date, Executive agrees to cooperate fully with the Company in any matters that have given, or may give, rise to a legal claim against the Company and of which he is knowledgeable as a result of his employment with the Company. This requires Executive, without limitation, to (i) make himself available upon reasonable request and notice and at a mutually agreeable time to provide information and assistance to the Company on such matters (including but not limited to preparing discovery responses, and preparing for and attending depositions, mediations, and trial), (ii) maintain the confidentiality of all Company privileged or confidential information including, without limitation, attorney-client privileged communications and attorney work product, unless disclosure is required by law or is expressly authorized by the Company, and (iii) notify the Company promptly of any requests to him for information related to any pending or potential legal claim or litigation involving the Company, reviewing any such request with a designated representative of the Company prior to disclosing any such information, and permitting a representative of the Company to be present during any communication of such information. If the Executive believes that the cooperation required of him under this Paragraph is of a substantial nature, upon Executive’s request, the Parties will discuss in good faith a consulting agreement to provide reasonable compensation to the Executive for the requested services. (g) The Company shall provide Executive (including his heirs, executors and administrators) with coverage under a standard directors and officers liability insurance policy at its expense for a period of seven (7) years following the Termination Date, and shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under Delaware law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been a director or officer of the Bank or the Company (whether or not he continues to be a director or officer at the time of incurring such expenses or liabilities), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable settlements (such settlements must be approved by the Board of the Company, as appropriate), provided, however, neither the Bank nor Company shall be required to indemnify or reimburse Executive for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising from any illegal or fraudulent act committed by Executive. 12. Section 409A. It is intended that all payments made under the terms of this Agreement come within exceptions to Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) as short-term deferrals or as payments of separation pay upon an involuntary separation of service. The Agreement and all related documents shall be interpreted and administered in accordance with that intention. However, if any amount payable under this Agreement is determined to be subject to Section 409A then such payments shall be administered in accordance with Section 409A, provided that the Company and the Bank shall not be liable for any failures under this Section 14 12 that result in any taxes or other amounts due under the terms of Section 409A. Each payment under this Agreement shall be considered a separate payment for purposes of Section 409A. To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in

 
11 accordance with the presumptions set forth in Treasury Regulation Section 1.409A 1(h). To the extent any amount subject to Section 409A is to be paid or provided to the Executive in connection with a separation from service at a time when he is considered a specified employee within the meaning of Section 409A then such payment shall not be made until the date that is six months and one day following such separation from service, or in a lump sum upon his earlier death. If payment of any amount subject to Section 409A is triggered by a separation from service that occurs while Executive is a “specified employee” (as defined by Section 409A) with, and if such amount is scheduled to be paid within six (6) months after such separation from service, the amount shall accrue without interest and shall be paid the first business day after the end of such six-month period, or, if earlier, within 15 days after the appointment of the personal representative or executor of the Executive’s estate following Executive’s death. If any payment subject to Section 409A is contingent on the delivery of a release by Executive and could occur in either of two years, the payment will occur in the later year. Nothing in this Agreement shall be construed as a guarantee of any particular tax treatment to Executive. Executive shall be solely responsible for the tax consequences with respect to all amounts payable under this agreement, and in no event shall the Company have any responsibility or liability if this Agreement does not meet any applicable requirements of Section 409A. 13. Supplemental Release. In consideration of the payments described in Sections 2 and 3, Executive agrees to sign and return to Carolyn Powell, Chief Human Resources Officer, Provident Bank, 111 Wood Ave. South, Iselin, NJ 08830 via email at Carolyn.Powell@Provident.Bank or by overnight delivery the Supplemental Release Agreement attached hereto as Exhibit A on (but not before) his Termination Date. Executive agrees that the Company or the Bank may delay payment of payments due and payable to Executive after his Termination Date until after the effective date of the Supplemental Release Agreement. IN WITNESS HEREOF, THE PARTIES HAVE AGREED AND AFFIXED THEIR SIGNATURES BELOW: PROVIDENT BANK By: /s/ Anthony J. Labozzetta Date: August 2,2023 PROVIDENT FINANCIAL SERVICES, INC. By: /s/ Anthony J. Labozzetta Date: August 2,2023 EXECUTIVE /s/ John Kuntz Date: August 1,2023 John Kuntz

 
12 Exhibit A SUPPLEMENTAL RELEASE AGREEMENT [Execution copy to be supplied on or before Termination Date] , 202_ Mr. John Kuntz Re: Supplemental Release Agreement Dear John: This is the Supplemental Release Agreement (“Supplemental Release”) that you have agreed to provide to Provident Bank and Provident Financial Services, Inc. (collectively referred to in this Supplemental Release as the “Company”). For and in consideration of the payments described in Sections 2 and 3 of the Transition Agreement and General Release (“Agreement”) between you and the Company that was entered into in 202_ (which is hereby incorporated by reference), you on your own behalf and on the behalf of your agents, heirs, executors, administrators, representatives, attorneys, successors and assigns, hereby releases and forever discharges the Company and its current, past and future parents, subsidiaries, divisions and affiliates, and each of their directors, officers, employees, shareholders, principals, agents, independent contractors, benefit plans, insurers, and re-insurers, and each of their heirs, successors and assigns (the “Releasees”), of and from any and all claims, promises, damages, and actions of any nature, whether in tort, contract, by statute, or on any other basis, whether in law or in equity, whether known or unknown, (collectively, “Claims”), which you may have against them arising prior to the Effective Date of the Supplemental Release. Without in any way limiting the foregoing general release, this release includes all Claims arising out of your employment with the Company, including the terms, conditions, and termination of your employment with the Company, including Claims for breach of express or implied contract, wrongful termination, constructive termination, retaliation, whistleblowing, discrimination, harassment, hostile working environment, abusive discharge, denial of or interference with leave, defamation, invasion of privacy, violation of public policy, interference with contractual relationships, and intentional or negligent infliction of emotional distress, as well as Claims under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, Section 1981 of the Civil Rights Act of 1866, the Americans with Disabilities Act, the Rehabilitation Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Worker Adjustment and Retraining Notification Act, the Fair Credit Reporting Act, the Employee Retirement Income Security Act, the Genetic Information Nondiscrimination Act, the Health Insurance Portability and Accountability Act, the Occupational Safety and Health Act, the Equal Pay Act, the Uniformed Services Employment and Reemployment Act, the False Claims Act (including the qui tam provision thereof), the Consolidated Omnibus Budget Reconciliation Act, The Dodd-Frank Wall Street Reform and Consumer Protection Act, the Electronic Communications Privacy Act (including the Stored Communications Act), the New Jersey Law Against Discrimination, the New Jersey Family Leave Act, the New Jersey Conscientious Employee Protection Act, the New Jersey Worker Freedom from Employer Intimidation Act, the New Jersey Wage and Hour Laws, the New Jersey Wage Payment Law, the New Jersey Earned Sick Leave Law, the New Jersey Civil Rights Act, the New Jersey Millville-Dallas Airmotive Plant Job Loss Notification Act, the New Jersey Statutory Provision Regarding Retaliation/Discrimination for Filing a Workers’ Compensation Claim, the New Jersey Smokers’

 
13 Rights Law, the New Jersey Equal Pay Act, the New Jersey Genetic Privacy Act, the New Jersey Fair Credit Reporting Act, the New Jersey False Claims Act, the New Jersey mini-COBRA law, or the New Jersey Constitution, as well as any Claims under any other federal, state or local statute, ordinance, order or regulation governing the rights of employees and employers. Without in any way limiting the foregoing general release, this release also includes all claims for compensatory damages, punitive damages, attorney’s fees, salary, bonuses, incentive payments, deferred compensation, and any payments described in the Change in Control Agreement dated December 16, 2015, by and between the Company, the Bank, and Executive, or other monies due. Except as may be necessary to enforce this Agreement, and to the fullest extent permitted by law, You agree not to permit, authorize, initiate, join or continue any lawsuit, administrative charges or complaints, arbitrations or proceedings (collectively, “Proceedings”) against any of the Releasees based in whole or in part on any Claim covered by this release. Notwithstanding the generality of the foregoing, nothing herein constitutes a release or waiver by you of, or prevents you from making or asserting: (i) any claim or right you may have under COBRA; (ii) any claim or right you may have for unemployment insurance or workers’ compensation benefits (other than for retaliation under workers’ compensation laws); (iii) any claim to vested benefits under the written terms of a qualified defined benefit or defined contribution Executive pension plan, non-qualified deferred compensation plan or equity incentive plan in which you participated in as of your Termination Date; (iv) any claim for indemnity under the Company’s certificate of incorporation and bylaws or to coverage under any directors’ and officers’ insurance policies; (v) any medical claim incurred during your employment that is payable under applicable medical plans or an employer-insured liability plan; (vi) any claim or right that may arise after the Effective Date of this Supplemental Release; (vii) any claim or right that is not otherwise able to be waived under applicable law. In addition, nothing herein shall prevent you from filing a charge or complaint with the Equal Employment Opportunity Commission (“EEOC”) or similar federal or state fair employment practices agency or interfere with your ability to participate in any investigation or proceeding conducted by such agency; provided, however, that your hereby waive any right to recover monetary damages or any other form of personal relief from the Releasees to the extent any such charge, complaint, investigation or proceeding asserts a claim subject to the release in this Agreement. You represent and warrant that to the extent it is determined that any aspect or portion of this Supplemental Release, including any aspect or portion of the release in this Supplemental Release, requires the approval of any court, agency or other body to be effective, that you will cooperate fully with the Company to secure that approval, and if requested will join in and support any such request for approval. The Parties agree that Paragraph 11(f) of the Agreement will apply to the cooperation required by this Paragraph. Consideration Period. Because the arrangements discussed in this Supplemental Release affect important rights and obligations, we advise you to consult with an attorney before you agree to the terms set forth herein. You have more than forty-five (45) days from the date you receive this Supplemental Release within which to consider it, but you may not sign it before your Termination Date. If you decide to accept the benefits offered herein, you must sign this Supplemental Release on (but not before) your Termination Date and return it promptly to Carolyn Powell, Chief Human Resources Officer, Provident Bank, 111 Wood Ave. South, Iselin, NJ 08830 via email at Carolyn.Powell@Provident.Bank or by overnight delivery. If you do not wish to accept the terms of this Supplemental Release, you do not have to do anything.

 
14 Revocation Rights. For a period of up to and including seven (7) days after the date you sign this Supplemental Release, you may revoke it entirely. No rights or obligations contained in this Supplemental Release shall become enforceable before the end of the 7-day revocation period. If you decide to revoke the Supplemental Release, you must deliver to Carolyn Powell, Chief Human Resources Officer, Provident Bank, 111 Wood Ave. South, Iselin, NJ 08830 via email at Carolyn.Powell@Provident.Bank or by overnight delivery a signed notice of revocation on or before the last day of this 7-day period. If you do not revoke this Supplemental Release, it will become effective and irrevocable after the expiration of the seven (7) revocation period (the Effective Date of the Supplemental Release). Acknowledgments. Your signature below will be an acknowledgment that no other promise or agreement of any kind has been made to you by the Company to cause you to execute this Supplemental Release, that you had more than forty-five days to review this Supplemental Release and were advised to consult with an attorney or other person of your choosing about its terms before signing it, that the only consideration for your signature is as indicated above, that you fully understand and accept this Supplemental Release, that you are not coerced into signing it, and that you signed it knowingly and voluntarily because it is satisfactory to you. This Supplemental Release is being offered as part of a reduction in force in connection with the Provident/Lakeland merger. Information concerning eligibility and selection for the position elimination and offer of severance is attached to this Supplemental Release. You acknowledge receipt of this information. I have carefully read the above Supplemental Release, understand the meaning and intent thereof, and voluntarily agree to its terms this ______ day of , 202_. John Kuntz (not valid if signed before your Termination Date)

 

Exhibit 31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Anthony J. Labozzetta, certify that:
1.
I have reviewed this report on Form 10-Q of Provident Financial Services, Inc;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:August 8, 2023
/s/ Anthony J. Labozzetta
Anthony J. Labozzetta
President and Chief Executive Officer

Exhibit 31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Thomas M. Lyons, certify that:
1.
I have reviewed this report on Form 10-Q of Provident Financial Services, Inc;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:August 8, 2023/s/ Thomas M. Lyons
Thomas M. Lyons
Senior Executive Vice President and Chief Financial Officer

Exhibit 32
Certification pursuant to
18 U.S.C. Section 1350,
as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Anthony J. Labozzetta, President and Chief Executive Officer, and Thomas M. Lyons, Senior Executive Vice President and Chief Financial Officer of Provident Financial Services, Inc. (the “Company”), each certify in his capacity as an officer of the Company that he has reviewed the quarterly report of the Company on Form 10-Q for the quarter ended June 30, 2023 and that to the best of his knowledge:
(1) the report fully complies with the requirements of Sections 13(a) of the Securities Exchange Act of 1934; and
(2) the information contained in the report fairly presents, in all material respects, the financial condition and results of operations.
The purpose of this statement is solely to comply with Title 18, Chapter 63, Section 1350 of the United States Code, as amended by Section 906 of the Sarbanes-Oxley Act of 2002.
 
Date:August 8, 2023
/s/ Anthony J. Labozzetta
Anthony J. Labozzetta
President and Chief Executive Officer
Date:August 8, 2023/s/ Thomas M. Lyons
Thomas M. Lyons
Senior Executive Vice President and Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.