PROVIDENT FINANCIAL SERVICES INC

Previous wording

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, 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, potential goodwill impairment, 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 pending merger 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 pending merger transaction may be more expensive to complete than anticipated, including as a result of conditions imposed by regulators, unexpected conditions, factors or events, diversion of management’s attention from ongoing business operations and opportunities; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger and integration of the companies; and the impact of a potential shutdown of the federal government.

Current wording

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 Current Reports on Form 8-K, and those related to the economic environment, particularly in the market areas in which the Company operates, inflation and unemployment, competitive products and pricing, real estate values, fiscal and monetary policies of the U.S. government, 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, potential goodwill impairment, 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, any failure to realize the anticipated benefits of the merger transaction when expected or at all; and the possibility that the transaction may be more expensive to complete than anticipated, including those resulting from the completion of the merger and integration of the companies.

Previous wording

The Company received all regulatory approvals for its previously announced acquisition of Lakeland Bancorp, Inc. ("Lakeland"), subject to certain conditions and commitments (referred to as the “Regulatory Conditions”). The Regulatory Conditions include, but are not limited to: prior to consummation of the merger, the Company must complete the issuance of $200 million of Tier 2 qualifying subordinated debt; for three years following consummation of the merger, Provident Bank must maintain regulatory capital ratios at or above 8.50% for Tier 1 Leverage Capital and 11.25% for Total Risk Based Capital; and Provident Bank must maintain its commercial real estate concentrations (as a percent of capital and reserves) at levels at or below those forecasted in the pro forma financial projections that Provident Bank submitted to the FDIC. In connection with the acquisition, Lakeland Bank, a wholly owned subsidiary of Lakeland, will be merged with and into Provident Bank, a wholly owned subsidiary of the Company. As of March 31, 2024, Lakeland had, on a consolidated basis, $11.00 billion in total assets, which included $8.30 billion in total loans and $8.50 billion in total deposits, and operated 67 full-service banking offices in New Jersey. Under the merger agreement, each share of Lakeland common stock will be exchanged for 0.8319 shares, or approximately 55 million shares, of the Company's common stock plus cash in lieu of fractional shares. Provident stockholders will own approximately 58% and Lakeland shareholders will own approximately 42% of the combined company. The combined company is expected to have approximately $25 billion in total assets, $19.2 billion in total loans and $18.6 billion in total deposits.

Current wording

Under the merger agreement, each share of Lakeland common stock was converted into the right to receive 0.8319 shares of the Company's common stock, a total of 54,356,954 shares converted, plus cash in lieu of fractional shares. The total consideration paid for the acquisition of Lakeland was $876.8 million. In connection with the acquisition, Lakeland Bank, a wholly owned subsidiary of Lakeland, was merged with and into the Bank.

Previous wording

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

Current wording

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

Previous wording

One of the most significant judgments involved in estimating the Company’s allowance for credit losses on loans relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period. As of March 31, 2024, the model incorporated Moody’s baseline economic forecast, as adjusted for qualitative factors, as well as an extensive review of classified loans and loans that were classified as impaired with a specific reserve assigned to those loans. For example, the commercial property price index used in the model has a higher proportion of office exposure relative to that of the Bank. This baseline outlook reflected a worsened economic forecast and related deterioration in the projected commercial property price index used in our CECL model. The Company made qualitative adjustments to the projected commercial real estate property price index, considering the differences in portfolio collateral composition versus the commercial property price index used in our CECL models. The allowance estimation process resulted in a total provision of $200,000 for the three months ended March 31, 2024, and an overall coverage ratio of 98 basis points. Management believes the allowance for credit losses allocated to the commercial real estate non-owner occupied portfolio segment accurately represents the estimated inherent losses, factoring in the qualitative adjustment and other assumptions, including the selection of the baseline forecast within the model. If the Company used the unadjusted baseline outlooks for the commercial property price index over the expected lives of Commercial Real Estate Non-Owner Occupied and Owner-Occupied loan portfolios, the provision would have risen by approximately $6.2 million, leading to an overall coverage ratio of approximately 104 basis points.

Current wording

One of the most significant judgments involved in estimating the Company’s allowance for credit losses on loans relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period. As of June 30, 2024, the model incorporated Moody’s baseline economic forecast, as adjusted for qualitative factors, as well as an extensive review of classified loans and loans that were classified as impaired with a specific reserve assigned to those loans. The allowance estimation process resulted in a total provision of $66.1 million and $66.3 million for the three and six months ended June 30, 2024, and an overall coverage ratio of 100 basis points. Management believes the allowance for credit losses accurately represents the estimated inherent losses, factoring in the qualitative adjustment and other assumptions, including the selection of the baseline forecast within the model. If the Company used a more severe outlook, the provision would have risen by approximately $8.0 million, leading to an overall coverage ratio of approximately 105 basis points.

Previous wording

The allowance for credit losses on loans individually evaluated for impairment is based upon loans that have been identified through the Company’s normal loan monitoring process. This process includes the review of delinquent and problem loans at the Company’s Delinquency, Credit, Credit Risk Management and Allowance Committees; or which may be identified through the Company’s loan review process. Generally, the Company only evaluates loans individually for impairment if the loan is non-accrual, non-homogeneous and the balance is greater than $1.0 million.

Current wording

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 Credit, Credit Risk Management and Allowance Committees; or which may be identified through the Company’s loan review process. Generally, the Company only evaluates loans individually for impairment if the loan is non-accrual, non-homogeneous and the balance is greater than $1.0 million.

Previous wording

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.

Current wording

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.

Previous wording

The CECL approach to calculate the allowance for credit losses on loans is significantly influenced by the composition, characteristics and quality of the Company’s loan portfolio, as well as the prevailing economic conditions and forecast utilized. Although management believes that the Company has established and maintained the allowance for credit losses at appropriate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment and economic forecast. Management evaluates its estimates and assumptions on an ongoing basis giving consideration to forecasted economic factors, historical loss experience and other factors. The model includes both quantitative and qualitative components. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods, and to the extent actual losses are higher than management estimates, additional provision for credit losses on loans could be required and could adversely affect our earnings or financial position in future periods. In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for credit losses as an integral part of their examination process. Such agencies may require the Company to recognize additions to the allowance or additional write-downs based on their judgments about information available to them at the time of their examination. Although management uses the best information available, the level of the allowance for credit losses remains an estimate that is subject to significant judgment and short-term volatility.

Current wording

Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods, and to the extent actual losses are higher than management estimates, additional provision for credit losses on loans could be required and could adversely affect our earnings or financial position in future periods. In addition, various regulatory agencies periodically review the adequacy of the Company’s allowance for credit losses as an integral part of their examination process. Such agencies may require the Company to recognize additions to the allowance or additional write-downs based on their judgments about information available to them at the time of their examination. Although management uses the best information available, the level of the allowance for credit losses remains an estimate that is subject to significant judgment and short-term volatility.

Previous wording

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 months ended March 31, 2024, the increase in provision was primarily attributable to an increase in specific reserves on impaired credits, partially offset by an improved economic forecast for the current quarter within our CECL model.

Current wording

Material changes to these and other relevant factors create 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, 2024, the provision for credit losses on loans totaled $66.1 million and $66.3 million, compared to an $9.8 million and a $16.4 million provision for credit losses for the three and six months ended June 30, 2023, respectively. The increases in provision for both periods was primarily attributable to an initial CECL provision for credit losses on loans of $60.1 million, recorded as part of the Lakeland merger.

Previous wording

The Company’s loan portfolio decreased $31.0 million to $10.84 billion as of March 31, 2024, from $10.87 billion as of December 31, 2023. The loan portfolio consists of the following:

Current wording

The Company’s loan portfolio totaled $18.76 billion as of June 30, 2024 and $10.87 billion as of December 31, 2023. The loan portfolio consisted of the following:

Previous wording

During the three months ended March 31, 2024, the loan portfolio had net decreases of $158.6 million in commercial mortgage loans, $12.8 million in residential mortgage loans and $4.0 million in consumer loans, partially offset by net increases of $72.1 million in commercial loans, $58.2 million in construction loans and $13.4 million in multi-family loans. Commercial real estate, multi-family, commercial and construction loans represented 86.7% of the loan portfolio as of March 31, 2024, compared to 86.5% as of December 31, 2023.

Current wording

As part of the merger with Lakeland, we acquired $7.91 billion in loans, net of purchase accounting adjustments. As of June 30, 2024, the acquired Lakeland loan portfolio, net of fair value marks, totaled $7.97 billion, which included $3.02 billion in commercial mortgage loans, $1.49 billion in commercial loans, $1.36 billion in multi-family loans, $878.2 million in residential loans, $564.5 million in specialty lending, $327.3 million in construction loans and $327.2 million in consumer loans. Commercial loans, consisting of commercial real estate, multi-family, commercial and construction loans, represented 85.9% of the loan portfolio as of June 30, 2024, compared to 86.5% as of December 31, 2023.

Previous wording

The Bank’s lending activities, though concentrated in the communities surrounding its offices, extend predominantly throughout New Jersey, eastern Pennsylvania and Nassau and Queens County, New York. This geographic concentration subjects the Company’s loan portfolio to the general economic conditions within these states. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses.

Current wording

The Bank’s lending activities, though concentrated in the communities surrounding its offices, extend predominantly throughout New Jersey, eastern Pennsylvania and Orange, Nassau and Queens Counties, New York. This geographic concentration subjects the Company’s loan portfolio to the general economic conditions within these states. The risks created by this concentration have been considered by management in the determination of the appropriateness of the allowance for credit losses.

Previous wording

We consider our commercial real estate loans to be higher risk categories in our loan portfolio. These loans are particularly sensitive to economic conditions. As of March 31, 2024, our portfolio of commercial real estate loans, including multi-family and construction loans, totaled $6.89 billion, or 63.50% of total gross loans.

Current wording

We consider our commercial real estate loans to be higher risk categories in our loan portfolio. These loans are particularly sensitive to economic conditions. As of June 30, 2024, our portfolio of commercial real estate loans, including multi-family and construction loans, totaled $11.50 billion, or 61.3% of total gross loans.

Previous wording

(1)As of March 31, 2024, Multi-family CRE loans on New York City properties totaled $192.4 million. This portfolio constitutes only 1.8% of total loans and has an average loan size of $2.8 million. Approximately $118.0 million of these loans are collateralized by rent stabilized apartments and all are performing.

Current wording

(1)As of June 30, 2024, multi-family CRE loans on New York City properties totaled $227.7 million. This portfolio constitutes only 1.2% of total loans and has an average loan size of $2.6 million. Approximately $113.6 million of these loans are collateralized by rent stabilized apartments and all are performing.

Previous wording

The table below summarizes the Company’s commercial real estate portfolio, including multi-family and construction loans as of March 31, 2024, as segregated by the geographic region in which the property is located (dollars in thousands):

Current wording

The table below summarizes the Company’s commercial real estate portfolio, including multi-family and construction loans on a gross basis, not including any purchase accounting adjustments as of June 30, 2024, as segregated by the geographic region in which the property is located (dollars in thousands):

Previous wording

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 $135.4 million and $53.8 million, respectively, as of March 31, 2024, compared to $140.5 million and $54.9 million, respectively, as of December 31, 2023. One SNC relationship, with an outstanding balance of $7.3 million (which represents approximately a 6% share of the total facility commitment) was 90 days or more delinquent as of March 31, 2024.

Current wording

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 $202.0 million and $109.1 million, respectively, as of June 30, 2024, compared to $140.5 million and $54.9 million, respectively, as of December 31, 2023. One SNC relationship, with an outstanding balance of $6.8 million (which represents approximately a 10.4% share of the total facility commitment) was 90 days or more delinquent as of June 30, 2024.

Previous wording

The Company had outstanding junior lien mortgages totaling $142.1 million as of March 31, 2024. Of this total, four loans totaling $507,000 were 90 days or more delinquent.

Current wording

The Company had outstanding junior lien mortgages totaling $334.7 million as of June 30, 2024. Of this total, two loans totaling $667,000 were 90 days or more delinquent.

Previous wording

As of March 31, 2024, the Company’s allowance for credit losses related to the loan portfolio was 0.98% of total loans, compared to 0.99% as of December 31, 2023 and 0.91% as of March 31, 2023, respectively. The Company recorded a provision for credit losses on loans of $200,000 for the three months ended March 31, 2024, compared with a provision of $6.0 million for the three months ended March 31, 2023, respectively. For the three months ended March 31, 2024, the Company had net charge-offs of $971,000 compared to net charge-offs of $671,000 for the same period in 2023. The allowance for credit losses decreased $771,000 to $106.4 million as of March 31, 2024 from $107.2 million as of December 31, 2023. The decrease in the provision for credit losses for the quarter was primarily attributable to an improved economic forecast for the current quarter within our CECL model, partially offset by an increase in specific reserves on impaired credits.

Current wording

As of June 30, 2024, the Company’s allowance for credit losses related to the loan portfolio was 1.00% of total loans, compared to 0.97% as of December 31, 2023 and June 30, 2023, respectively. The Company recorded provisions for credit losses on loans of $66.1 million and $66.3 million for the three and six months ended June 30, 2024, compared with provisions of $10.4 million and $16.4 million for the three and six months ended June 30, 2023, respectively. For the three and six months ended June 30, 2024, the Company had net charge-offs of $1.3 million and $2.3 million, respectively, compared to net charge-offs of $1.1 million and $1.8 million, respectively, for the same periods in 2023. The allowance for credit losses increased $81.1 million to $188.3 million as of June 30, 2024 from $107.2 million as of December 31, 2023. The increases in provision for both periods were primarily attributable to an initial CECL provision for credit losses on loans of $60.1 million recorded as part of the Lakeland merger in accordance with GAAP requirements for accounting for business combinations.

Previous wording

Total non-performing loans were $47.6 million, or 0.44% of total loans as of March 31, 2024, compared to $49.6 million, or 0.46% of total loans as of December 31, 2023. The $2.0 million decrease in non-performing loans as of March 31, 2024, compared to the trailing quarter, consisted of a $4.6 million decrease in non-performing commercial loans and a $771,000 decrease in non-performing construction loans, partially offset by a $1.6 million increase in non-performing multi-family loans, a $794,000 increase in non-performing residential mortgage loans, a $787,000 increase in non-performing commercial mortgage loans and a $127,000 increase in non-performing consumer loans.

Current wording

Total non-performing loans were $67.9 million, or 0.36% of total loans as of June 30, 2024, compared to $49.6 million, or 0.46% of total loans as of December 31, 2023. The $18.2 million increase in non-performing loans, which was primarily attributable to the addition of Lakeland, consisted of a $10.9 million increase in non-performing construction loans, a $6.5 million increase in non-performing multi-family loans, a $3.6 million increase in non-performing residential mortgage loans and a $511,000 increase in non-performing consumer loans, partially offset by a $1.8 million decrease in non-performing commercial loans and a $1.6 million decrease in non-performing commercial mortgage loans.

Previous wording

As of March 31, 2024 and December 31, 2023, the Company held foreclosed assets of $11.3 million and $11.7 million, respectively. During the three months ended March 31, 2024, there were two properties sold with an aggregate carrying value of $327,000. Foreclosed assets as of March 31, 2024 consisted primarily of commercial real estate. Total non-performing assets as of March 31, 2024, decreased $2.4 million to $58.9 million, or 0.42% of total assets, from $61.3 million, or 0.43% of total assets as of December 31, 2023.

Current wording

As of June 30, 2024 and December 31, 2023, the Company held foreclosed assets of $11.1 million and $11.7 million, respectively. During the six months ended June 30, 2024, there were three properties sold with an aggregate carrying value of $532,000. Foreclosed assets as of June 30, 2024 consisted primarily of commercial real estate. Total non-performing assets as of June 30, 2024 increased $17.7 million to $79.0 million, or 0.33% of total assets, from $61.3 million, or 0.43% of total assets as of December 31, 2023.

Previous wording

Total deposits decreased $193.6 million during the three months ended March 31, 2024, to $10.10 billion. The decrease in total deposits was primarily due to a decrease in brokered deposits of $90.0 million and a decrease in municipal deposits of $57.0 million. Total savings and demand deposit accounts decreased $129.7 million to $9.07 billion as of March 31, 2024, while total time deposits decreased $64.0 million to $1.03 billion as of March 31, 2024. The decrease in savings and demand deposits consisted of a $149.1 million decrease in non-interest-bearing demand deposits and a $14.7 million decrease in savings deposits, partially offset by a $28.6 million increase in interest bearing demand deposits and a $5.5 million increase in money market deposits. The decrease in time deposits consisted of a $90.0 million decrease in brokered time deposits, partially offset by a $26.0 million increase in retail time deposits.

Current wording

Total deposits increased $8.06 billion during the six months ended June 30, 2024, to $18.35 billion, due to the addition of Lakeland. Total savings and demand deposit accounts increased $6.07 billion to $15.27 billion as of June 30, 2024, while total time deposits increased $1.99 billion to $3.08 billion as of June 30, 2024. The increase in savings and demand deposits was largely attributable to a $2.88 billion increase in interest bearing demand deposits, a $1.51 billion increase in non-interest bearing demand deposits, a $1.12 billion increase in money market deposits and a $569.5 million increase in savings deposits. The Company's Insured Cash Sweep deposits increased $619.8 million to $1.14 billion as of June 30, 2024, from $520.2 million as of December 31, 2023. The increase in time deposits consisted of a $2.09 billion increase in retail time deposits, partially offset by a $100.5 million decrease in brokered time deposits.

Previous wording

Within total deposits, brokered deposits totaled $75.7 million as of March 31, 2024. Our estimated uninsured and uncollateralized deposits as of March 31, 2024 totaled $2.49 billion, or 24.7% of deposits. Our total estimated uninsured deposits, including collateralized deposits as of March 31, 2024 was $5.25 billion. Within time deposits, approximately $96.7 million, or 9.4% was uninsured as of March 31, 2024.

Current wording

Within total deposits, brokered deposits totaled $149.8 million and $165.7 million as of June 30, 2024 and December 31, 2023, respectively. Our estimated uninsured and uncollateralized deposits as of June 30, 2024 totaled $4.98 billion, or 27.1% of deposits. Our total estimated uninsured deposits, including collateralized deposits, as of June 30, 2024, were $6.34 billion. Within time deposits, approximately $414.7 million, or 13.5% was uninsured as of June 30, 2024.

Previous wording

Borrowed funds increased $88.1 million during the three months ended March 31, 2024, to $2.06 billion. The increase in borrowings was largely due to asset funding requirements. Borrowed funds represented 14.6% of total assets as of March 31, 2024, an increase from 13.9% as of December 31, 2023.

Current wording

Borrowed funds increased $332.0 million during the six months ended June 30, 2024, to $2.30 billion. The increase in deposits and borrowings was largely due to the addition of Lakeland. Borrowed funds represented 9.6% of total assets as of June 30, 2024, a decrease from 13.9% as of December 31, 2023.

Previous wording

Stockholders’ equity increased $4.6 million during the three months ended March 31, 2024, to $1.70 billion, primarily due to net income earned for the period, partially offset by an increase in unrealized losses on available for sale debt securities and cash dividends paid to stockholders. For the three months ended March 31, 2024, common stock repurchases totaled 86,325 shares at an average cost of $14.84 per share, all of which were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. As of March 31, 2024, approximately 1.0 million shares remained eligible for repurchase under the current stock repurchase authorization.

Current wording

Stockholders’ equity increased $865.1 million during the six months ended June 30, 2024, to $2.56 billion, primarily due to common stock issued for the purchase of Lakeland and net income earned for the period, partially offset by an increase in unrealized losses on available for sale debt securities and cash dividends paid to stockholders. For the three and six months ended June 30, 2024, common stock repurchases totaled 527 shares at an average cost of $15.17 per share and 86,852 shares at an average cost of $14.84 per share, respectively, all of which were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. As of June 30, 2024, approximately 1.0 million shares remained eligible for repurchase under the current stock repurchase authorization.

Previous wording

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.

Current wording

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, FRBNY and approved broker-dealers.

Previous wording

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 the three months ended March 31, 2024 and 2023, loan repayments totaled $648.8 million and $826.7 million, respectively.

Current wording

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 the six months ended June 30, 2024 and 2023, loan repayments totaled $1.54 billion and $1.50 billion, respectively.

Previous wording

As deposits have declined, the Company has continued to monitor and focus on depositor behavior and borrowing capacity with the FHLBNY and FRBNY, with current borrowing capacity of $1.72 billion and $1.33 billion, respectively as of March 31, 2024. Our estimated uninsured and uncollateralized deposits as of March 31, 2024 totaled $2.49 billion, or 24.7% of deposits. Our total estimated uninsured deposits, including collateralized deposits as of March 31, 2024, was $5.25 billion.

Current wording

The Company has continued to monitor and focus on depositor behavior and borrowing capacity with the FHLBNY and FRBNY, with current borrowing capacity of $3.46 billion and $1.30 billion, respectively, as of June 30, 2024. Our estimated uninsured and uncollateralized deposits as of June 30, 2024 totaled $4.98 billion, or 27.1% of deposits. Our total estimated uninsured deposits, including collateralized deposits as of June 30, 2024, were $6.34 billion.

Previous wording

In March 2023, the Bank established a facility under the BTFP with the FRBNY. As of March 31, 2024, the Company had $550.0 million of advances under the Program. We elected to participate in the BTFP program due to significant cost savings compared to other wholesale funding sources. The funding was used to pay off existing wholesale borrowings. The ability to prepay at any time without penalty also enhances our ability to manage our interest rate risk position.

Current wording

In March 2023, the Company established a facility under the BTFP with the FRBNY. As of June 30, 2024, the Company had $550.0 million of advances under the Program. The Company elected to participate in the BTFP program due to significant cost savings compared to other wholesale funding sources. The funding was used to pay off existing wholesale borrowings. The ability to prepay at any time without penalty also enhances our ability to manage our interest rate risk position.

Previous wording

Total deposits decreased $193.6 million for the three months ended March 31, 2024. Deposit activity is affected by changes in interest rates, competitive pricing and product offerings in the marketplace, local economic conditions, customer confidence and other factors such as stock market volatility. Certificate of deposit accounts that are scheduled to mature within one year totaled $881.1 million as of March 31, 2024. Based on its current pricing strategy and customer retention experience, the Bank expects to retain a significant share of these accounts. The Bank manages liquidity on a daily basis and expects to have sufficient cash to meet all of its funding requirements.

Current wording

Total deposits increased $8.06 billion for the six months ended June 30, 2024, due to the addition of Lakeland. Deposit activity is affected by changes in interest rates, competitive pricing and product offerings in the marketplace, local economic conditions, customer confidence and other factors such as stock market volatility. Certificate of deposit accounts that are scheduled to mature within one year totaled $2.82 billion as of June 30, 2024. Based on its current pricing strategy and customer retention experience, the Bank expects to retain a significant share of these accounts. The Bank manages liquidity on a daily basis and expects to have sufficient cash to meet all of its funding requirements.

Previous wording

(2) For a period of three years following completion of the merger, Provident Bank will be required to maintain a Tier 1 capital to total assets leverage ratio of at least 8.5% and a total capital to risk-based assets ratio of at least 11.25%.

Current wording

(2) For a period of three years following completion of the merger, the Bank will be required to maintain a Tier 1 capital to total assets leverage ratio of at least 8.5% and a total capital to risk-based assets ratio of at least 11.25%.

Previous wording

COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Current wording

COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND 2023

Previous wording

General. The Company reported net income of $32.1 million, or $0.43 per basic and diluted share for the three months ended March 31, 2024, compared to net income of $40.5 million, or $0.54 per basic and diluted share, for the three months ended March 31, 2023.

Current wording

General. The Company reported a net loss of $11.5 million, or $0.11 per basic and diluted share for the three months ended June 30, 2024, compared to net income of $32.0 million, or $0.43 per basic and diluted share, for the three months ended June

Previous wording

The following tables sets forth certain information for the three months ended March 31, 2024 and 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.

Current wording

The following tables sets forth certain information for the three and six months ended June 30, 2024. 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.

Previous wording

The net interest margin decreased 61 basis points to 2.87% for the quarter ended March 31, 2024, compared to 3.48% for the quarter ended March 31, 2023. The weighted average yield on interest-earning assets increased 43 basis points to 5.06% for the quarter ended March 31, 2024, compared to 4.63% for the quarter ended March 31, 2023, while the weighted average cost of interest-bearing liabilities increased 126 basis points for the quarter ended March 31, 2024, to 2.80%, compared to 1.54% for the quarter ended March 31, 2023. The average cost of interest-bearing deposits for the quarter ended March 31, 2024, was 2.60%, compared to 1.39% for the same period last year. Average non-interest-bearing demand deposits totaled $2.07 billion for the quarter ended March 31, 2024, compared to $2.55 billion for the quarter ended March 31, 2023. The average cost of total deposits, including non-interest-bearing deposits, was 2.07% for the quarter ended March 31, 2024, compared with 1.05% for the quarter ended March 31, 2023. The average cost of borrowed funds for the quarter ended March 31, 2024, was 3.60%, compared to 2.48% for the same period last year.

Current wording

The net interest margin increased 10 basis points to 3.21% for the quarter ended June 30, 2024, compared to 3.11% for the quarter ended June 30, 2023. The weighted average yield on interest-earning assets increased 94 basis points to 5.67% for the quarter ended June 30, 2024, compared to 4.73% for the quarter ended June 30, 2023, while the weighted average cost of interest-bearing liabilities increased 96 basis points for the quarter ended June 30, 2024, to 3.09%, compared to 2.13% for the quarter ended June 30, 2023. The average cost of interest-bearing deposits for the quarter ended June 30, 2024, was 2.84%, compared to 1.85% for the same period last year. Average non-interest-bearing demand deposits totaled $2.87 billion for the quarter ended June 30, 2024, compared to $2.37 billion for the quarter ended June 30, 2023. The average cost of total deposits, including non-interest-bearing deposits, was 2.27% for the quarter ended June 30, 2024, compared with 1.42% for the quarter ended June 30, 2023. The average cost of borrowed funds for the quarter ended June 30, 2024, was 3.83%, compared to 3.41% for the same period last year.

Previous wording

Interest income on loans secured by real estate increased $11.5 million to $107.5 million for the three months ended March 31, 2024, from $96.0 million for the three months ended March 31, 2023. Commercial loan interest income increased $7.4 million to $36.1 million for the three months ended March 31, 2024, from $28.7 million for the three months ended March 31, 2023. Consumer loan interest income increased $0.3 million to $4.5 million for the three months ended March 31, 2024, from $4.2 million for the three months ended March 31, 2023. For the three months ended March 31, 2024, the average balance of total loans increased $575.1 million to $10.67 billion, compared to the same period in 2023. The average yield on total loans for the three months ended March 31, 2024, increased 39 basis points to 5.51%, from 5.12% for the same period in 2023.

Current wording

Interest income on loans secured by real estate increased $57.0 million to $156.3 million for the three months ended June 30, 2024, from $99.3 million for the three months ended June 30, 2023. Commercial loan interest income increased $27.1 million to $58.5 million for the three months ended June 30, 2024, from $31.4 million for the three months ended June 30, 2023. Consumer loan interest income increased $3.9 million to $8.4 million for the three months ended June 30, 2024, from $4.4 million for the three months ended June 30, 2023. For the three months ended June 30, 2024, the average balance of total loans increased $4.41 billion to $14.65 billion, compared to the same period in 2023. The average yield on total loans for the three months ended June 30, 2024, increased 81 basis points to 6.05%, from 5.24% for the same period in 2023.

Previous wording

Interest income on held to maturity debt securities decreased $100,000 to $2.3 million for the three months ended March 31, 2024, compared to the same period last year. Average held to maturity debt securities decreased $26.7 million to $357.2 million for the three months ended March 31, 2024, from $383.9 million for the same period in 2023.

Current wording

Interest income on held to maturity debt securities totaled $2.4 million for the three months ended June 30, 2024, compared to the same period last year. Average held to maturity debt securities decreased $27.7 million to $352.2 million for the three months ended June 30, 2024, from $380.0 million for the same period last year. Interest income on held to maturity debt securities decreased $100,000 to $4.6 million for the six months ended June 30, 2024, compared to the same period in 2023. Average held to maturity debt securities decreased $27.2 million to $354.7 million for the six months ended June 30, 2024, from $381.9 million for the same period last year.

Previous wording

Interest income on available for sale debt securities decreased $380,000 to $10.0 million for the three months ended March 31, 2024, from $10.4 million for the three months ended March 31, 2023. The average balance of available for sale debt securities decreased $134.7 million to $1.67 billion for the three months ended March 31, 2024, compared to the same period in 2023.

Current wording

Interest income on available for sale debt securities increased $7.4 million to $17.6 million for the three months ended June 30, 2024, from $10.3 million for the three months ended June 30, 2023. The average balance of available for sale debt securities increased $443.7 million to $2.24 billion for the three months ended June 30, 2024, compared to the same period in 2023. Interest income on available for sale debt securities increased $7.0 million to $27.7 million for the six months ended June 30, 2024, from $20.7 million for the same period last year. The average balance of available for sale debt securities increased $154.7 million to $1.96 billion for the six months ended June 30, 2024.

Previous wording

Dividend income on FHLBNY stock increased $1.3 million to $2.3 million for the three months ended March 31, 2024, from $1.0 million for the three months ended March 31, 2023. The average balance of FHLBNY stock increased $14.6 million to $73.8 million for the three months ended March 31, 2024, compared to the same period in 2023.

Current wording

Interest income on FHLBNY stock increased $1.6 million to $2.7 million for the three months ended June 30, 2024, from $1.14 million for the three months ended June 30, 2023. The average balance of FHLBNY stock increased $6.7 million to $88.9 million for the three months ended June 30, 2024, compared to the same period in 2023. Interest income on FHLBNY stock increased $9.9 million to $32.7 million for the six months ended June 30, 2024, from $22.9 million for the same period last year. The average balance of FHLBNY stock increased $10.6 million to $81.3 million for the six months ended June 30, 2024.

Previous wording

The average yield on total securities increased to 2.87% for the three months ended March 31, 2024, compared with 2.52% for the same period in 2023.

Current wording

The average yield on total securities increased to 3.40% for the three months ended June 30, 2024, compared with 2.53% for the same period in 2023. For the six months ended June 30, 2024, the average yield on total securities increased to 3.14%, compared with 2.52% for the same period in 2023.

Previous wording

Interest expense on deposit accounts increased $25.0 million to $52.5 million for the three months ended March 31, 2024, compared with $27.5 million for the three months ended March 31, 2023. The average cost of interest-bearing deposits increased to 2.60% for the three months ended March 31, 2024, from 1.39% for the three months ended March 31, 2023. The average balance of interest-bearing core deposits, which consist of total savings and demand deposits, for the three months ended March 31, 2024, decreased $112.8 million to $7.06 billion. Average time deposit account balances increased $205.4 million to $1.07 billion for the three months ended March 31, 2024, from $859.8 million for the three months ended March 31, 2023.

Current wording

Interest expense on deposit accounts increased $44.6 million to $81.1 million for the three months ended June 30, 2024, compared with $36.4 million for the three months ended June 30, 2023. For the six months ended June 30, 2024, interest expense on deposit accounts increased $69.6 million to $133.6 million, from $64.0 million for the same period last year. The average cost of interest-bearing deposits increased to 2.84% and 2.74% for the three and six months ended June 30, 2024, respectively, from 1.85% and 1.62% for the three and six months ended June 30, 2023, respectively. The average balance of interest-bearing core deposits, which consist of total savings and demand deposits, for the three months ended June 30, 2024, increased $2.46 billion to $9.39 billion. For the six months ended June 30, 2024, average interest-bearing core deposits increased $1.18 billion, to $8.22 billion, from $7.05 billion for the same period in 2023. Average time deposit account balances increased $1.12 billion to $2.09 billion for the three months ended June 30, 2024, from $968.3 million for the three months ended June 30, 2023. For the six months ended June 30, 2024, average time deposit account balances increased $661.4 million to $1.58 billion, from $914.4 million for the same period in 2023.

Previous wording

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.

Current wording

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 as necessary.