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Provident Financial Services
PFS
#4126
Rank
$2.78 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$21.30
Share price
0.09%
Change (1 day)
36.54%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Provident Financial Services
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2022 Q1

Provident Financial Services - 10-Q quarterly report FY2022 Q1


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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 3/31/2022
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 May 2, 2022 there were 83,209,012 shares issued and 75,443,160 shares outstanding of the Registrant’s Common Stock, par value $0.01 per share, including 123,321 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
PART I—FINANCIAL INFORMATION
1
Consolidated Statements of Financial Condition as of March 31, 2022 (unaudited) and December 31, 2021
3
Consolidated Statements of Income for the three months ended March 31, 2022 and 2021 (unaudited)
4
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2022 and 2021 (unaudited)
5
Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)
6
Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)
7
9
2
42
3
49
4
51
PART II—OTHER INFORMATION
1
51
1A.
51
2
51
3
Defaults Upon Senior Securities
51
4
51
5
51
6
Exhibits
51
53



2

PART I—FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
March 31, 2022 (Unaudited) and December 31, 2021
(Dollars in Thousands)
 
March 31, 2022December 31, 2021
ASSETS
Cash and due from banks$330,814 $506,270 
Short-term investments102,332 206,193 
Total cash and cash equivalents433,146 712,463 
Available for sale debt securities, at fair value2,072,337 2,057,851 
Held to maturity debt securities, net (fair value of $417,664 and $449,709 at March 31, 2022 and December 31, 2021, respectively).
421,958 436,150 
Equity securities, at fair value1,256 1,325 
Federal Home Loan Bank stock23,973 34,290 
Loans9,662,882 9,581,624 
Less allowance for credit losses76,275 80,740 
Net loans9,586,607 9,500,884 
Foreclosed assets, net8,578 8,731 
Banking premises and equipment, net82,987 80,559 
Accrued interest receivable41,033 41,990 
Intangible assets463,325 464,183 
Bank-owned life insurance237,808 236,630 
Other assets244,006 206,146 
Total assets$13,617,014 $13,781,202 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand deposits$9,183,808 $9,080,956 
Savings deposits1,490,624 1,460,541 
Certificates of deposit of $100,000 or more391,321 368,277 
Other time deposits300,334 324,238 
Total deposits11,366,087 11,234,012 
Mortgage escrow deposits40,184 34,440 
Borrowed funds399,606 626,774 
Subordinated debentures10,336 10,283 
Other liabilities179,670 178,597 
Total liabilities11,995,883 12,084,106 
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 75,881,889 shares outstanding at March 31, 2022, and 83,209,012 shares issued and 76,969,999 shares outstanding at December 31, 2021, respectively.
832 832 
Additional paid-in capital972,552 969,815 
Retained earnings839,807 814,533 
Accumulated other comprehensive (loss) income (67,946)6,863 
Treasury stock(109,581)(79,603)
Unallocated common stock held by the Employee Stock Ownership Plan(14,533)(15,344)
Common stock acquired by the Directors' Deferred Fee Plan ("DDFP")(3,844)(3,984)
Deferred Compensation - Directors' Deferred Fee Plan3,844 3,984 
Total stockholders’ equity1,621,131 1,697,096 
Total liabilities and stockholders’ equity$13,617,014 $13,781,202 
See accompanying notes to unaudited consolidated financial statements.
3


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Income
Three months ended March 31, 2022 and 2021 (Unaudited)
(Dollars in Thousands, except per share data)
 
Three months ended March 31,
20222021
Interest income:
Real estate secured loans$63,835 $62,016 
Commercial loans22,821 26,143 
Consumer loans3,139 3,492 
Available for sale debt securities, equity securities and Federal Home Loan Bank stock7,951 5,612 
Held to maturity debt securities2,596 2,784 
Deposits, Federal funds sold and other short-term investments647 484 
Total interest income100,989 100,531 
Interest expense:
Deposits5,187 7,417 
Borrowed funds1,168 2,809 
Subordinated debt108 305 
Total interest expense6,463 10,531 
Net interest income94,526 90,000 
Provision benefit for credit losses(6,405)(15,001)
Net interest income after provision for credit losses100,931 105,001 
Non-interest income:
Fees6,889 7,192 
Wealth management income7,466 7,134 
Insurance agency income3,420 2,727 
Bank-owned life insurance1,179 2,567 
Net gains on securities transactions16 197 
Other income1,178 1,820 
Total non-interest income20,148 21,637 
Non-interest expense:
Compensation and employee benefits37,067 35,312 
Net occupancy expense9,330 9,301 
Data processing expense5,344 4,393 
FDIC insurance1,205 1,770 
Amortization of intangibles859 972 
Advertising and promotion expense1,104 877 
Credit loss benefit for off-balance sheet credit exposures(2,390)(875)
Other operating expenses9,367 10,103 
Total non-interest expense61,886 61,853 
Income before income tax expense59,193 64,785 
Income tax expense15,231 16,226 
Net income$43,962 $48,559 
Basic earnings per share$0.58 $0.63 
Weighted average basic shares outstanding75,817,971 76,516,543 
Diluted earnings per share$0.58 $0.63 
Weighted average diluted shares outstanding75,914,079 76,580,862 

See accompanying notes to unaudited consolidated financial statements.
4


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
Three months ended March 31, 2022 and 2021 (Unaudited)
(Dollars in Thousands)
 
Three months ended March 31,
20222021
Net income$43,962 $48,559 
Other comprehensive (loss) income, net of tax:
Unrealized gains and losses on available for sale debt securities:
Net unrealized losses arising during the period(84,971)(9,019)
Reclassification adjustment for gains included in net income— (171)
Total(84,971)(9,190)
Unrealized gains on derivatives 10,438 4,621 
Amortization related to post-retirement obligations(276)(109)
Total other comprehensive loss(74,809)(4,678)
Total comprehensive (loss) income$(30,847)$43,881 

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 months ended March 31, 2021 (Unaudited)
(Dollars in Thousands)
For the three months ended March 31, 2021
COMMON STOCKADDITIONAL PAID-IN CAPITALRETAINED EARNINGSACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)TREASURYSTOCKUNALLOCATED ESOP SHARESCOMMON STOCK ACQUIRED BY DEFERRED COMP PLANSDEFERRED COMPENSATION PLANSTOTAL STOCKHOLDERS’ EQUITY
Balance at December 31, 2020$832 $962,453 $718,090 $17,655 $(59,018)$(20,215)$(4,549)$4,549 $1,619,797 
Net income— — 48,559 — — — — — 48,559 
Other comprehensive loss, net of tax— — — (4,678)— — — — (4,678)
Cash dividends paid— — (18,075)— — — — — (18,075)
Distributions from DDFP— 28 — — — — 168 (168)28 
Purchases of treasury stock— — — — (48)— — — (48)
Purchase of employee restricted shares to fund statutory tax withholding— — — — (915)— — — (915)
Shares issued dividend reinvestment plan— — — — — — — — — 
Stock option exercises— (82)— — 720 — — — 638 
Allocation of ESOP shares— 145 — — — 768 — — 913 
Allocation of Stock Award Plan ("SAP") shares— 959 — — — — — — 959 
Allocation of stock options— 53 — — — — — — 53 
Balance at March 31, 2021$832 $963,556 $748,574 $12,977 $(59,261)$(19,447)$(4,381)$4,381 $1,647,231 
See accompanying notes to unaudited consolidated financial statements.
PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders’ Equity
For the three months ended March 31, 2022 (Unaudited)
(Dollars in Thousands)
For the three months ended March 31, 2022
COMMON STOCKADDITIONAL PAID-IN CAPITALRETAINED EARNINGSACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)TREASURY STOCKUNALLOCATED ESOP SHARESCOMMON STOCK ACQUIRED BY DEFERRED COMP PLANSDEFERRED COMPENSATION PLANSTOTAL STOCKHOLDERS’ EQUITY
Balance at December 31, 2021832 969,815 814,533 6,863 (79,603)(15,344)(3,984)3,984 1,697,096 
Net income— — 43,962 — — — — — 43,962 
Other comprehensive loss, net of tax— — — (74,809)— — — — (74,809)
Cash dividends paid— — (18,688)— — — — — (18,688)
Distributions from DDFP— 45 — — — — 140 (140)45 
Purchases of treasury stock— — — — (29,025)— — — (29,025)
Purchase of employee restricted shares to fund statutory tax withholding— — — — (953)— — — (953)
Shares issued dividend reinvestment plan— — — — — — — — — 
Stock option exercises— — — — — — — — — 
Allocation of ESOP shares— 332 — — — 811 — — 1,143 
Allocation of SAP shares— 2,311 — — — — — — 2,311 
Allocation of stock options— 49 — — — — — — 49 
Balance at March 31, 2022$832 $972,552 $839,807 $(67,946)$(109,581)$(14,533)$(3,844)$3,844 $1,621,131 

See accompanying notes to unaudited consolidated financial statements.
6


PROVIDENT FINANCIAL SERVICES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three months ended March 31, 2022 and 2021 (Unaudited)
(Dollars in Thousands)
 
Three months ended March 31,
20222021
Cash flows from operating activities:
Net income$43,962 $48,559 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of intangibles3,247 3,264 
Provision benefit for credit losses on loans and securities(6,405)(15,001)
Credit loss benefit for off-balance sheet credit exposure(2,390)(875)
Deferred tax expense 10,625 6,271 
Amortization of operating lease right-of-use assets2,807 2,812 
Income on Bank-owned life insurance(1,179)(2,567)
Net amortization of premiums and discounts on securities3,844 3,110 
Accretion of net deferred loan fees(2,438)(5,487)
Amortization of premiums on purchased loans, net71 190 
Net increase in loans originated for sale— (14,492)
Proceeds from sales of loans originated for sale— 15,260 
Proceeds from sales and paydowns of foreclosed assets200 569 
ESOP expense1,143 913 
Allocation of stock award shares2,311 959 
Allocation of stock options49 53 
Net gain on sale of loans — (768)
Net gain on securities transactions(16)(197)
Net gain on sale of premises and equipment(8)(15)
Net gain on sale of foreclosed assets— (170)
Decrease (increase) in accrued interest receivable957 (2,567)
(Increase) decrease in other assets(6,718)41,160 
Increase (decrease) in other liabilities1,073 (44,565)
Net cash provided by operating activities51,135 36,416 
Cash flows from investing activities:
Proceeds from maturities, calls and paydowns of held to maturity debt securities16,694 10,236 
Purchases of held to maturity debt securities(2,941)(7,541)
Proceeds from sales of securities— 9,442 
Proceeds from maturities and paydowns of available for sale debt securities84,128 90,807 
Purchases of available for sale debt securities(218,082)(226,417)
Proceeds from redemption of Federal Home Loan Bank stock10,317 12,147 
Purchases of Federal Home Loan Bank stock— (1,656)
Purchases of loans2,610 — 
Net (increase) decrease in loans(76,328)24,217 
Proceeds from sales of premises and equipment8 15 
Purchases of premises and equipment(8,843)(1,846)
Net cash used in investing activities(192,437)(90,596)
Cash flows from financing activities:
Net increase in deposits132,075 459,684 
Increase in mortgage escrow deposits5,744 3,474 
Cash dividends paid to stockholders(18,688)(18,075)
Purchase of treasury stock$(29,025)$(48)
7

Three months ended March 31,
20222021
Purchase of employee restricted shares to fund statutory tax withholding(953)(915)
Stock options exercised— 638 
Proceeds from long-term borrowings— 400,000 
Payments on long-term borrowings(229,111)(619,265)
Net increase (decrease) in short-term borrowings1,943 (16,096)
Net cash (used in) provided by financing activities(138,015)209,397 
Net (decrease) increase in cash and cash equivalents(279,317)155,217 
Cash and cash equivalents at beginning of period685,163 418,083 
Restricted cash at beginning of period27,300 114,270 
Total cash, cash equivalents and restricted cash at beginning of period712,463 532,353 
Cash and cash equivalents at end of period428,326 644,940 
Restricted cash at end of period4,820 42,630 
Total cash, cash equivalents and restricted cash at end of period$433,146 $687,570 
Cash paid during the period for:
Interest on deposits and borrowings$7,084 $10,399 
Income taxes$560 $270 
Non-cash investing activities:
Transfer of loans receivable to foreclosed assets$47 $434 
See accompanying notes to unaudited consolidated financial statements.
8


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. and its wholly owned subsidiary, Provident Bank (the “Bank,” together with Provident Financial Services, Inc., the “Company”).
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 and the valuation of deferred tax assets are estimates that are particularly susceptible to 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 months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for all of 2022.
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, 2021 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 months ended March 31, 2022 and 2021 (dollars in thousands, except per share amounts):
Three months ended March 31,
20222021
Net
Income		Weighted
Average
Common
Shares
Outstanding		Per
Share
Amount 		Net
Income		Weighted
Average
Common
Shares
Outstanding 		Per
Share
Amount
Net income$43,962 $48,559 
Basic earnings per share:
Income available to common stockholders$43,962 75,817,971 $0.58 $48,559 76,516,543 $0.63 
Dilutive shares96,108 64,319 
Diluted earnings per share:
Income available to common stockholders$43,962 75,914,079 $0.58 $48,559 76,580,862 $0.63 
Anti-dilutive stock options and awards at March 31, 2022 and 2021, totaling 971,452 shares and 1.2 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 months ended March 31, 2022, the improved economic outlook and the resulting lower allowance requirements led to reductions to the provisions for credit losses and off-balance sheet credit exposures. See Note 3 to the Consolidated Financial Statements for more information on the allowance for credit losses on loans.
9



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 annual goodwill impairment test as of July 1, 2021. As of March 31, 2022, it is not more likely than not that the fair value of Provident Financial Services, Inc., the reporting unit, is below its carrying amount and therefore a test for impairment between annual tests is not required at this time.
Note 2. Investment Securities
At March 31, 2022, the Company had $2.07 billion and $422.0 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, regulatory actions, changes in the business environment or any changes in the competitive marketplace could have an adverse effect on the Company’s investment portfolio. The total number of available for sale and held to maturity debt securities in an unrealized loss position at March 31, 2022 totaled 489, compared with 166 at December 31, 2021. The increase in the number of securities in an unrealized loss position at March 31, 2022 was due to higher current market interest rates compared to rates at December 31, 2021.
Management measures expected credit losses on held to maturity debt securities on a collective basis by security type. Management classifies the held to maturity debt securities portfolio into the following security types:
•Agency obligations;
•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 no lower than A ratings from the rating agencies at March 31, 2022 and the Company had one security rated BBB by Moody’s Investors Service.
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 March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022
Amortized
cost		Gross
unrealized
gains		Gross
unrealized
losses		Fair
value
U.S. Treasury obligations$274,876 — (14,711)260,165 
Mortgage-backed securities1,767,392 1,132 (98,060)1,670,464 
Asset-backed securities43,895 1,139 (98)44,936 
State and municipal obligations68,453 31 (4,638)63,846 
Corporate obligations34,088 239 (1,401)32,926 
$2,188,704 2,541 (118,908)2,072,337 
10

December 31, 2021
Amortized
cost		Gross
unrealized
gains		Gross
unrealized
losses		Fair
value
U.S. Treasury obligations$196,897 298 (866)196,329 
Mortgage-backed securities1,711,312 14,082 (16,563)1,708,831 
Asset-backed securities45,115 1,687 (5)46,797 
State and municipal obligations68,702 1,127 (122)69,707 
Corporate obligations36,109 425 (347)36,187 
$2,058,135 17,619 (17,903)2,057,851 
The amortized cost and fair value of available for sale debt securities at March 31, 2022, by contractual maturity, are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.
March 31, 2022
Amortized
cost		Fair
value
Due in one year or less$997 1,005 
Due after one year through five years137,234 130,466 
Due after five years through ten years174,136 164,946 
Due after ten years65,050 60,520 
$377,417 356,937 
Investments which pay principal on a periodic basis totaling $1.81 billion at amortized cost and $1.72 billion at fair value are excluded from the table above, as their expected lives are likely to be shorter than the contractual maturity date due to principal prepayments.
For the three months ended March 31, 2022, no securities were sold or called from the available for sale debt securities portfolio. For the three months ended March 31, 2021, proceeds from calls on securities in the available for sale debt securities portfolio totaled $9.4 million, with gains of $230,000 and no loss recognized.
The following tables present the fair values and gross unrealized losses for available for sale debt securities in an unrealized loss position at March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022
Less than 12 months12 months or longerTotal
Fair
value		Gross
unrealized
losses 		Fair
value		Gross
unrealized
losses 		Fair
value		Gross
unrealized
losses
U.S. Treasury obligations$260,165 (14,711)— — 260,165 (14,711)
Mortgage-backed securities1,352,508 (84,395)155,913 (13,665)1,508,422 (98,060)
Asset-backed securities1,810 (98)— — 1,810 (98)
State and municipal obligations60,024 (4,638)— — 60,024 (4,638)
Corporate obligations14,270 (730)6,124 (671)20,394 (1,401)
$1,688,777 (104,572)162,037 (14,336)1,850,815 (118,908)
11

December 31, 2021
Less than 12 months12 months or longerTotal
Fair
value
 Gross
unrealized
losses
Fair
value
Gross
unrealized
losses 		Fair
value		Gross
unrealized
losses
U.S. Treasury obligations$98,621 (866)— — 98,621 (866)
Mortgage-backed securities1,147,403 (15,176)33,850 (1,387)1,181,253 (16,563)
Asset-backed securities 1,930 (5)— — 1,930 (5)
State and municipal obligations10,732 (122)— — 10,732 (122)
Corporate obligations18,474 (347)— — 18,474 (347)
$1,277,160 (16,516)33,850 (1,387)1,311,010 (17,903)
The number of available for sale debt securities in an unrealized loss position at March 31, 2022 totaled 309, compared with 113 at December 31, 2021. The increase in the number of securities in an unrealized loss position at March 31, 2022 was due to higher current market interest rates compared to rates at December 31, 2021. At March 31, 2022, there were three private label mortgage-backed securities in an unrealized loss position, with an amortized cost of $3.4 million and an unrealized loss of $212,000. These private-label mortgage-backed securities were investment grade at March 31, 2022.
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 March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022
Amortized
cost		Gross
unrealized
gains 		Gross
unrealized
losses 		Fair
value
U.S. Treasury obligations$1,430 — — 1,430 
Agency obligations9,997 — (622)9,375 
Mortgage-backed securities13 — — 13 
State and municipal obligations400,629 3,411 (6,625)397,415 
Corporate obligations9,923 1 (493)9,431 
$421,992 3,412 (7,740)417,664 
At March 31, 2022, the allowance for credit losses on held to maturity debt securities totaled $34,000 and is excluded from amortized cost in the table above.
December 31, 2021
Amortized
cost		Gross
unrealized
gains 		Gross
unrealized
losses 		Fair
value
Agency obligations$9,996 — (175)9,821 
Mortgage-backed securities21 — — 21 
State and municipal obligations415,724 14,463 (635)429,552 
Corporate obligations10,448 19 (152)10,315 
$436,189 14,482 (962)449,709 
At December 31, 2021, the allowance for credit losses on held to maturity debt securities totaled $39,000 and is excluded from amortized cost in the table above.
The Company generally purchases securities for long-term investment purposes, and differences between amortized cost and fair value may fluctuate during the investment period. There were no sales of securities from the held to maturity debt securities portfolio for the three months ended March 31, 2022 and 2021. For the three months ended March 31, 2022, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $15.8 million with gross gains of $16,000 and no gross losses. For the three months ended March 31, 2021, proceeds from calls on securities in the held to maturity debt securities portfolio totaled $6.8 million with gross losses of $33,000 and no gross gains.
12

The amortized cost and fair value of investment securities in the held to maturity debt securities portfolio at March 31, 2022 by contractual maturity are shown below (in thousands). Expected maturities may differ from contractual maturities due to prepayment or early call privileges of the issuer.
March 31, 2022
Amortized
cost		Fair
value
Due in one year or less$17,286 17,338 
Due after one year through five years153,590 152,915 
Due after five years through ten years194,905 194,739 
Due after ten years56,198 52,659 
$421,979 417,651 
Mortgage-backed securities totaling $13,000 at amortized cost and $13,000 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. Additionally, the allowance for credit losses totaling $34,000 is excluded from the table above.
The following tables present the fair values and gross unrealized losses for held to maturity debt securities in an unrealized loss position at March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022 Unrealized Losses
Less than 12 months12 months or longerTotal
Fair
value		Gross
unrealized
losses 		Fair
value		Gross
unrealized
losses 		Fair
value		Gross
unrealized
losses
Agency obligations$9,374 (622)— — 9,374 (622)
State and municipal obligations90,209 (5,480)8,482 (1,145)98,691 (6,625)
Corporate obligations8,105 (493)— — 8,105 (493)
$107,688 (6,595)8,482 (1,145)116,170 (7,740)
December 31, 2021 Unrealized Losses
Less than 12 months12 months or longerTotal
Fair
value		Gross
unrealized
losses		Fair
value		Gross
unrealized
losses		Fair
value		Gross
unrealized
losses
Agency obligations$9,821 (175)— — 9,821 (175)
State and municipal obligations27,350 (471)5,022 (164)32,372 (635)
Corporate obligations7,649 (152)— — 7,649 (152)
$44,820 (798)5,022 (164)49,842 (962)
The number of held to maturity debt securities in an unrealized loss position at March 31, 2022 totaled 180, compared with 53 at December 31, 2021. The increase in the number of securities in an unrealized loss position at March 31, 2022, was due to higher current market interest rates compared to rates at December 31, 2021.
13

Credit Quality Indicators. The following table provides the amortized cost of held to maturity debt securities by credit rating as of March 31, 2022 (in thousands):
March 31, 2022
Total PortfolioAAAAAABBBNot RatedTotal
Treasury Obligations$1,430 — — — — 1,430 
Agency obligations9,997 — — — — 9,997 
Mortgage-backed securities13 — — — — 13 
State and municipal obligations53,191 305,861 39,664 945 968 400,629 
Corporate obligations509 2,124 7,265 — 25 9,923 
$65,140 307,985 46,929 945 993 421,992 
December 31, 2021
Total PortfolioAAAAAABBBNot RatedTotal
Agency obligations$9,996 — — — — 9,996 
Mortgage-backed securities21 — — — — 21 
State and municipal obligations54,583 314,396 44,392 945 1,408 415,724 
Corporate obligations510 2,634 7,279 — 25 10,448 
$65,110 317,030 51,671 945 1,433 436,189 
Credit quality indicators are metrics that provide information regarding the relative credit risk of debt securities. At March 31, 2022, the held to maturity debt securities portfolio was comprised of 15% rated AAA, 73% rated AA, 11% 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.
At March 31, 2022, the allowance for credit losses on held to maturity debt securities was $34,000, a decrease from $39,000 at December 31, 2021.
Note 3. Loans Receivable and Allowance for Credit Losses
Loans receivable at March 31, 2022 and December 31, 2021 are summarized as follows (in thousands):
March 31, 2022December 31, 2021
Mortgage loans:
Residential$1,194,613 1,202,638 
Commercial3,937,216 3,827,370 
Multi-family1,394,761 1,364,397 
Construction699,415 683,166 
Total mortgage loans7,226,005 7,077,571 
Commercial loans2,131,326 2,188,866 
Consumer loans316,589 327,442 
Total gross loans9,673,920 9,593,879 
Premiums on purchased loans1,482 1,451 
Net deferred fees and unearned discounts(12,520)(13,706)
Total loans$9,662,882 9,581,624 
The following tables summarize the aging of loans receivable by portfolio segment and class of loans (in thousands):
14

March 31, 2022
30-59 Days60-89 DaysNon-accrualRecorded
Investment
> 90 days
accruing		Total Past
Due 		CurrentTotal Loans
Receivable		Non-accrual loans with no specific allowance
Mortgage loans:
Residential$2,385 1,354 5,396 — 9,135 1,185,478 1,194,613 5,396 
Commercial282 — 19,533 — 19,815 3,917,401 3,937,216 19,533 
Multi-family816 — 2,053 — 2,869 1,391,892 1,394,761 2,053 
Construction1,659 — 2,366 — 4,025 695,390 699,415 2,366 
Total mortgage loans5,142 1,354 29,348 — 35,844 7,190,161 7,226,005 29,348 
Commercial loans4,019 318 13,793 — 18,130 2,113,196 2,131,326 10,366 
Consumer loans571 90 1,171 — 1,832 314,757 316,589 1,171 
Total gross loans$9,732 1,762 44,312 — 55,806 9,618,114 9,673,920 40,885 
December 31, 2021
30-59 Days60-89 DaysNon-accrualRecorded
Investment
> 90 days
accruing		Total Past
Due 		CurrentTotal Loans ReceivableNon-accrual loans with no specific allowance
Mortgage loans:
Residential$7,229 1,131 6,072 — 14,432 1,188,206 1,202,638 6,072 
Commercial720 3,960 16,887 — 21,567 3,805,803 3,827,370 16,887 
Multi-family— — 439 — 439 1,363,958 1,364,397 439 
Construction— — 2,365 — 2,365 680,801 683,166 2,365 
Total mortgage loans7,949 5,091 25,763 — 38,803 7,038,768 7,077,571 25,763 
Commercial loans7,229 1,289 20,582 — 29,100 2,159,766 2,188,866 14,453 
Consumer loans649 228 1,682 — 2,559 324,883 327,442 1,682 
Total gross loans$15,827 6,608 48,027 — 70,462 9,523,417 9,593,879 41,898 

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 $44.3 million and $48.0 million at March 31, 2022 and December 31, 2021, respectively. Included in non-accrual loans were $20.3 million and $23.0 million of loans which were less than 90 days past due at March 31, 2022 and December 31, 2021, respectively. There were no loans 90 days or greater past due and still accruing interest at March 31, 2022 and December 31, 2021. Generally, accrued interest is written off by reversing interest income during the quarter the loan is moved from an accrual to a non-accrual status.
The Company defines an impaired loan 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. Impaired loans also include all loans modified as troubled debt restructurings (“TDRs”). An allowance for collateral-dependent impaired loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any 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.
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. 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.
15

At March 31, 2022, there were 134 impaired loans totaling $48.3 million. Included in this total were 105 TDRs related to 102 borrowers totaling $20.3 million that were performing in accordance with their restructured terms and which continued to accrue interest at March 31, 2022. At December 31, 2021, there were 155 impaired loans totaling $52.3 million, of which 132 loans totaling $30.6 million were TDRs. Included in this total were 115 TDRs to 111 borrowers totaling $21.9 million that were performing in accordance with their restructured terms and which continued to accrue interest at December 31, 2021.
At March 31, 2022 and December 31, 2021, the fair value of the assets securing collateral-dependent impaired loans totaled $16.2 million and $18.2 million, respectively. These collateral-dependent impaired loans at March 31, 2022 consisted of $14.4 million in commercial loans, $1.7 million in residential real estate loans, and $64,000 in consumer loans. The collateral for these impaired loans was primarily real estate.
The activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2022 and 2021 was as follows (in thousands):
Three months ended March 31,Mortgage loansCommercial loansConsumer loansTotal
2022
Balance at beginning of period$52,104 26,343 2,293 80,740 
Provision benefit to operations(1,995)(4,404)(1)(6,400)
Recoveries of loans previously charged-off10 1,860 166 2,036 
Loans charged-off(23)— (78)(101)
Balance at end of period$50,096 23,799 2,380 76,275 
2021
Balance at beginning of period$68,307 27,084 6,075 101,466 
Provision benefit to operations(13,467)(467)(1,066)(15,000)
Recoveries of loans previously charged-off276 528 303 1,107 
Loans charged-off(918)(843)(221)(1,982)
Balance at end of period$54,198 26,302 5,091 85,591 
For the three months ended March 31, 2022, the Company recorded a $6.4 million provision benefit for credit losses on loans, compared to a $15.0 million provision benefit for the same period in 2021. The decrease in the period-over-period provision benefit was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period.
The following tables summarize loans receivable by portfolio segment and impairment method (in thousands):
March 31, 2022
Mortgage
loans		Commercial
loans		Consumer
loans		Total Portfolio
Segments
Individually evaluated for impairment$37,976 9,147 1,200 48,323 
Collectively evaluated for impairment7,188,029 2,122,179 315,389 9,625,597 
Total gross loans$7,226,005 2,131,326 316,589 9,673,920 
December 31, 2021
Mortgage
loans		Commercial
loans		Consumer
loans		Total Portfolio
Segments
Individually evaluated for impairment$34,610 16,420 1,224 52,254 
Collectively evaluated for impairment7,042,961 2,172,446 326,218 9,541,625 
Total gross loans$7,077,571 2,188,866 327,442 9,593,879 
16

The allowance for credit losses is summarized by portfolio segment and impairment classification as follows (in thousands):
March 31, 2022
Mortgage
loans		Commercial loansConsumer loansTotal
Individually evaluated for impairment$840 1,145 49 2,034 
Collectively evaluated for impairment49,256 22,654 2,331 74,241 
Total gross loans$50,096 23,799 2,380 76,275 
December 31, 2021
Mortgage
loans		Commercial loansConsumer
loans		Total
Individually evaluated for impairment$875 3,358 51 4,284 
Collectively evaluated for impairment51,229 22,985 2,242 76,456 
Total gross loans$52,104 26,343 2,293 80,740 
Loan modifications for borrowers experiencing financial difficulties that are considered TDRs primarily involve lowering the monthly payments on such loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. These modifications generally do not result in the forgiveness of principal or accrued interest. 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 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 tables present the number of loans modified as TDRs during the three months ended March 31, 2022 and 2021, along with their balances immediately prior to the modification date and post-modification as of March 31, 2022 and 2021 (in thousands):
For the three months ended
March 31, 2022March 31, 2021
Troubled Debt RestructuringsNumber of
Loans		Pre-Modification
Outstanding
Recorded 
Investment		Post-Modification
Outstanding
Recorded Investment		Number of
Loans		Pre-Modification
Outstanding
Recorded  Investment		Post-Modification
Outstanding
Recorded  Investment
Mortgage loans:
Commercial loans— — — 3 1,361 1,359 
Total restructured loans— $— $— 3 $1,361 $1,359 
All TDRs are impaired loans, which are individually evaluated for impairment. During the three months ended March 31, 2022, no charge-offs were recorded on collateral-dependent impaired loans, while $1.5 million of charge-offs were recorded on collateral-dependent impaired loans during the three months ended March 31, 2021. For the three months ended March 31, 2022, there was no allowance for credit losses for loans associated with the TDRs presented in the preceding tables.
There were no loans which had a payment default (90 days or more past due) for loans modified as TDRs within the 12 month periods ending March 31, 2022 and March 31, 2021. For TDRs that subsequently default, the Company determines 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 March 31, 2022, the balance of PCD loans totaled $242.7 million with a related allowance for credit losses of $2.8 million. The balance of PCD loans at December 31, 2021 was $246.9 million with a related allowance for credit losses of $2.8 million.
17


The following table presents loans individually evaluated for impairment by class and loan category (in thousands):
March 31, 2022December 31, 2021
Unpaid Principal BalanceRecorded InvestmentRelated AllowanceAverage Recorded InvestmentInterest Income RecognizedUnpaid Principal BalanceRecorded InvestmentRelated AllowanceAverage Recorded InvestmentInterest Income Recognized
Loans with no related allowance
Mortgage loans:
Residential$11,064 8,680 — 8,723 95 12,326 9,814 — 9,999 423 
Commercial18,381 17,648 — 17,723 14 15,310 14,685 — 15,064 63 
Multi-family1,614 1,614 — 1,620 — — — — — — 
Construction1,656 1,588 — 1,588 — 1,656 1,588 — 1,643 30 
Total32,715 29,530 — 29,654 109 29,292 26,087 — 26,706 516 
Commercial loans5,670 3,645 — 3,680 4 9,845 7,254 — 7,714 33 
Consumer loans1,425 889 — 898 14 1,389 853 — 1,613 115 
Total impaired loans$39,810 34,064 — 34,232 127 40,526 34,194 — 36,033 664 
Loans with an allowance recorded
Mortgage loans:
Residential$7,925 7,584 824 7,617 72 7,994 7,652 858 7,742 278 
Commercial862 862 16 867 12 871 871 17 894 48 
Total8,787 8,446 840 8,484 84 8,865 8,523 875 8,636 326 
Commercial loans6,152 5,502 1,145 8,546 34 9,498 9,166 3,358 8,304 257 
Consumer loans331 311 49 313 3 391 371 51 379 18 
Total impaired loans$15,270 14,259 2,034 17,343 121 18,754 18,060 4,284 17,319 601 
Total impaired loans
Mortgage loans:
Residential$18,989 16,264 824 16,340 167 20,320 17,466 858 17,741 701 
Commercial19,243 18,510 16 18,590 26 16,181 15,556 17 15,958 111 
Multi-family1,614 1,614 — 1,620 — — — — — — 
Construction1,656 1,588 — 1,588 — 1,656 1,588 — 1,643 30 
Total41,502 37,976 840 38,138 193 38,157 34,610 875 35,342 842 
Commercial loans11,822 9,147 1,145 12,226 38 19,343 16,420 3,358 16,018 290 
Consumer loans1,756 1,200 49 1,211 17 1,780 1,224 51 1,992 133 
Total impaired loans$55,080 48,323 2,034 51,575 248 59,280 52,254 4,284 53,352 1,265 
Specific allocations of the allowance for credit losses attributable to impaired loans totaled $2.0 million at March 31, 2022 and $4.3 million at December 31, 2021. At March 31, 2022 and December 31, 2021, impaired loans for which there was no related allowance for credit losses totaled $34.1 million and $34.2 million, respectively. The average balance of impaired loans for the three months ended March 31, 2022 and the twelve months ended December 31, 2021 was $51.6 million and $53.4 million, respectively.
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.
18

The Company participated in the Paycheck Protection Program (“PPP”) through the United States Department of the Treasury and Small Business Administration ("SBA"). The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan was made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. As of March 31, 2022, the Company secured 2,067 PPP loans for its customers totaling $682.0 million, which includes both the initial round and the second round of PPP. As of March 31, 2022, 1,994 PPP loans totaling $653.1 million were forgiven and repaid by the SBA. At March 31, 2022, PPP loans totaled $28.9 million, and are included in the commercial loan portfolio.
The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades as of March 31, 2022 and December 31, 2021 (in thousands):
Gross Loans Held for Investment by Year of Origination
at March 31, 2022
20222021202020192018Prior to 2018Revolving LoansRevolving loans to term loansTotal Loans
Residential
Special mention$— — — — — 1,354 — — 1,354 
Substandard— — — — 280 7,718 — — 7,998 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — — 280 9,072 — — 9,352 
Pass/Watch45,614 225,105 228,755 109,721 62,727 513,339 — — 1,185,261 
Total residential$45,614 225,105 228,755 109,721 63,007 522,411 — — 1,194,613 
Commercial Mortgage
Special mention$— — 838 28,703 49,024 13,930 — — 92,495 
Substandard — — — — 7,330 22,648 774 — 30,752 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — 838 28,703 56,354 36,578 774 — 123,247 
Pass/Watch235,572 662,441 602,550 572,794 284,646 1,319,324 105,975 30,667 3,813,969 
Total commercial mortgage$235,572 662,441 603,388 601,497 341,000 1,355,902 106,749 30,667 3,937,216 
Multi-family
Special mention$— — — — — 1,683 — — 1,683 
Substandard— — 439 — — 2,554 — — 2,993 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — 439 — — 4,237 — — 4,676 
Pass/Watch51,221 154,053 284,440 155,014 193,026 548,473 2,695 1,163 1,390,085 
Total multi-family$51,221 154,053 284,879 155,014 193,026 552,710 2,695 1,163 1,394,761 
Construction
Special mention$— — — 939 19,014 — — — 19,953 
Substandard— — — 382 2,365 — — — 2,747 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
19

Gross Loans Held for Investment by Year of Origination
at March 31, 2022
20222021202020192018Prior to 2018Revolving LoansRevolving loans to term loansTotal Loans
Total criticized and classified— — — 1,321 21,379 — — — 22,700 
Pass/Watch15,848 224,941 167,494 218,541 41,172 2,404 6,315 676,715 
Total construction$15,848 224,941 167,494 219,862 62,551 2,404 — 6,315 699,415 
Total Mortgage
Special mention$— — 838 29,642 68,038 16,967 — — 115,485 
Substandard— — 439 382 9,975 32,920 774 — 44,490 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — 1,277 30,024 78,013 49,887 774 — 159,975 
Pass/Watch348,255 1,266,540 1,283,239 1,056,070 581,571 2,383,540 108,670 38,145 7,066,030 
Total Mortgage$348,255 1,266,540 1,284,516 1,086,094 659,584 2,433,427 109,444 38,145 7,226,005 
Commercial
Special mention$— — 129 829 3,227 53,407 2,563 1,305 61,460 
Substandard— — 2 9,257 5,683 77,111 20,600 913 113,566 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — 131 10,086 8,910 130,518 23,163 2,218 175,026 
Pass/Watch125,998 484,075 232,947 207,513 165,858 294,256 408,921 36,732 1,956,300 
Total commercial$125,998 484,075 233,078 217,599 174,768 424,774 432,084 38,950 2,131,326 
Consumer (1)
Special mention$— — — — — 2 — 88 90 
Substandard— — — — 114 1,014 6 — 1,134 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — — 114 1,016 6 88 1,224 
Pass/Watch7,666 23,475 3,559 19,820 19,832 105,679 119,412 15,922 315,365 
Total consumer$7,666 23,475 3,559 19,820 19,946 106,695 119,418 16,010 316,589 
Total Loans
Special mention$— — 967 30,471 71,265 70,376 2,563 1,393 177,035 
Substandard— — 441 9,639 15,772 111,045 21,380 913 159,190 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — 1,408 40,110 87,037 181,421 23,943 2,306 336,225 
Pass/Watch481,919 1,774,090 1,519,745 1,283,403 767,261 2,783,475 637,003 90,799 9,337,695 
20

Gross Loans Held for Investment by Year of Origination
at March 31, 2022
20222021202020192018Prior to 2018Revolving LoansRevolving loans to term loansTotal Loans
Total gross loans$481,919 1,774,090 1,521,153 1,323,513 854,298 2,964,896 660,946 93,105 9,673,920 
(1) For 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, 2021
20212020201920182017Prior to 2017Revolving LoansRevolving loans to term loansTotal Loans
Residential
Special mention$— — — — 697 434 — — 1,131 
Substandard— — — 280 166 8,569 — — 9,015 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — 280 863 9,003 — — 10,146 
Pass/Watch229,106 235,949 113,206 67,493 75,906 470,832 — — 1,192,492 
Total residential$229,106 235,949 113,206 67,773 76,769 479,835 — — 1,202,638 
Commercial Mortgage
Special mention$— 2,624 28,706 22,296 9,657 26,668 1,094 — 91,045 
Substandard— — 18 34,260 7,352 34,356 799 — 76,785 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— 2,624 28,724 56,556 17,009 61,024 1,893 — 167,830 
Pass/Watch655,105 600,030 589,578 298,665 430,947 952,746 101,618 30,851 3,659,540 
Total commercial mortgage$655,105 602,654 618,302 355,221 447,956 1,013,770 103,511 30,851 3,827,370 
Multi-family
Special mention$— — — — 3,053 271 — — 3,324 
Substandard— 439 — — 945 — — 1,384 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— 439 — — 3,053 1,216 — — 4,708 
Pass/Watch154,419 294,716 166,558 173,583 117,654 448,710 2,880 1,169 1,359,689 
Total multi-family$154,419 295,155 166,558 173,583 120,707 449,926 2,880 1,169 1,364,397 
Construction
Special mention$— 1,125 — — — — — — 1,125 
Substandard— — — 2,365 — — — — 2,365 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— 1,125 — 2,365 — — — — 3,490 
21

Gross Loans Held for Investment by Year of Origination
at December 31, 2021
20212020201920182017Prior to 2017Revolving LoansRevolving loans to term loansTotal Loans
Pass/Watch173,843 176,182 219,331 94,363 9,604 103 6,250 679,676 
Total construction$173,843 177,307 219,331 96,728 9,604 103 — 6,250 683,166 
Total Mortgage
Special mention$— 3,749 28,706 22,296 13,407 27,373 1,094 — 96,625 
Substandard— 439 18 36,905 7,518 43,870 799 — 89,549 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— 4,188 28,724 59,201 20,925 71,243 1,893 — 186,174 
Pass/Watch1,212,473 1,306,877 1,088,673 634,104 634,111 1,872,391 104,498 38,270 6,891,397 
Total Mortgage$1,212,473 1,311,065 1,117,397 693,305 655,036 1,943,634 106,391 38,270 7,077,571 
Commercial
Special mention$1,232 2,662 2,816 3,263 24,418 40,561 8,389 2,155 85,496 
Substandard— 736 5,517 5,860 5,747 64,807 13,622 1,821 98,110 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified1,232 3,398 8,333 9,123 30,165 105,368 22,011 3,976 183,606 
Pass/Watch415,924 222,132 179,193 154,440 149,567 489,051 355,097 39,856 2,005,260 
Total commercial$417,156 225,530 187,526 163,563 179,732 594,419 377,108 43,832 2,188,866 
Consumer (1)
Special mention$— — — — — 109 25 94 228 
Substandard— — — 116 2 1,514 6 — 1,638 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified— — — 116 2 1,623 31 94 1,866 
Pass/Watch25,140 4,503 24,272 21,046 15,804 99,106 119,347 16,358 325,576 
Total consumer$25,140 4,503 24,272 21,162 15,806 100,729 119,378 16,452 327,442 
Total Loans
Special mention$1,232 6,411 31,522 25,559 37,825 68,043 9,508 2,249 182,349 
Substandard— 1,175 5,535 42,881 13,267 110,191 14,427 1,821 189,297 
Doubtful— — — — — — — — — 
Loss— — — — — — — — — 
Total criticized and classified1,232 7,586 37,057 68,440 51,092 178,234 23,935 4,070 371,646 
Pass/Watch1,653,537 1,533,512 1,292,138 809,590 799,482 2,460,548 578,942 94,484 9,222,233 
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Gross Loans Held for Investment by Year of Origination
at December 31, 2021
20212020201920182017Prior to 2017Revolving LoansRevolving loans to term loansTotal Loans
Total gross loans $1,654,769 1,541,098 1,329,195 878,030 850,574 2,638,782 602,877 98,554 9,593,879 

(1) For consumer loans, the Company assigns internal credit grades based on the delinquency status of each loan.
Note 4. Deposits
Deposits at March 31, 2022 and December 31, 2021 are summarized as follows (in thousands):
March 31, 2022December 31, 2021
Savings$1,490,624 1,460,541 
Money market2,652,077 2,592,523 
NOW3,705,969 3,722,198 
Non-interest bearing2,825,762 2,766,235 
Certificates of deposit691,655 692,515 
Total deposits$11,366,087 11,234,012 
Note 5. Borrowed Funds
Borrowed funds at March 31, 2022 and December 31, 2021 are summarized as follows (in thousands):
March 31, 2022December 31, 2021
Securities sold under repurchase agreements$118,759 116,760 
FHLB line of credit— — 
FHLB advances280,848 510,014 
Total borrowed funds$399,606 626,774 
At March 31, 2022, FHLB advances were at fixed rates and mature between April 2022 and July 2025, and at December 31, 2021, FHLB advances were at fixed rates with maturities between January 2022 and July 2025. These advances are secured by loans receivable under a blanket collateral agreement.
Scheduled maturities of FHLB advances at March 31, 2022 are as follows (in thousands):
 2022
Due in one year or less$102,971 
Due after one year through two years45,049 
Due after two years through three years74,668 
Due after three years through four years58,160 
Thereafter— 
Total FHLB advances$280,848 
Scheduled maturities of securities sold under repurchase agreements at March 31, 2022 are as follows (in thousands):
 2022
Due in one year or less$118,759 
Thereafter— 
Total securities sold under repurchase agreements$118,759 
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The following tables set forth certain information as to borrowed funds for the periods ended March 31, 2022 and December 31, 2021 (in thousands):
Maximum
balance
Average
balance
Weighted average
interest rate
March 31, 2022
Securities sold under repurchase agreements$120,188 117,615 0.30 %
FHLB line of credit— — — 
FHLB advances488,996 432,064 0.99 
December 31, 2021
Securities sold under repurchase agreements$132,005 116,158 0.07 %
FHLB line of credit— 205 0.34 
FHLB advances941,939 673,014 1.27 
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 March 31, 2022 and December 31, 2021, available for sale debt securities pledged as collateral for repurchase agreements totaled $133.3 million and $136.0 million, respectively.
Interest expense on borrowings for the three months ended March 31, 2022 and 2021 was $1.2 million and $2.8 million, respectively.
Note 6. Components of Net Periodic Benefit Cost
The Bank has a noncontributory defined benefit pension plan covering its full-time employees who had attained age 21 with at least one year of service as of April 1, 2003. The pension plan was frozen on April 1, 2003. All participants in the Plan are 100% vested. The pension plan’s assets are invested in investment funds and group annuity contracts currently managed by the Principal Financial Group and Allmerica Financial.
In addition to pension benefits, certain health care and life insurance benefits are currently made available to certain of the Bank’s retired employees. The costs of such benefits are accrued based on actuarial assumptions from the date of hire to the date the employee is fully eligible to receive the benefits. Effective January 1, 2003, eligibility for retiree health care benefits was frozen as to new entrants, and benefits were eliminated for employees with less than ten years of service as of December 31, 2002. Effective January 1, 2007, eligibility for retiree life insurance benefits was frozen as to new entrants and retiree life insurance benefits were eliminated for employees with less than ten years of service as of December 31, 2006.
Net periodic (benefit) increase cost for pension benefits and other post-retirement benefits for the three months ended March 31, 2022 and 2021, includes the following components (in thousands):
Three months ended March 31,
Pension benefitsOther post-retirement benefits
2022202120222021
Service cost$— — 7 9 
Interest cost214 198 111 106 
Expected return on plan assets(864)(807)— — 
Amortization of prior service cost— — — — 
Amortization of the net loss (gain)— 118 (326)(268)
Net periodic (benefit) cost$(650)(491)(208)(153)
In its consolidated financial statements for the year ended December 31, 2021, the Company previously disclosed that it does not expect to contribute to the pension plan in 2022. As of March 31, 2022, 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 months ended March 31, 2022 were calculated using the January 1, 2022 pension and other post-retirement benefits actuarial valuations.
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Note 7. Impact of Recent Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
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 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted if an entity has adopted ASU 2016-13. The Company continues to assess the impact that this guidance will have on the Company’s consolidated financial statements.
In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method." This ASU clarifies the guidance in ASC 815 on fair value hedge accounting of interest rate risk for portfolios of financial assets. The ASU amends the guidance in ASU 2017-12 that, among other things, established the “last-of-layer” method for making the fair value hedge accounting for these portfolios more accessible. ASU 2022-01 renames that method the “portfolio layer” method and addresses feedback from stakeholders regarding its application. Under current guidance, the last-of-layer method enables an entity to apply fair value hedging to a stated amount of a closed portfolio of prepayable financial assets (or one or more beneficial interests secured by a portfolio of prepayable financial instruments) without having to consider prepayment risk or credit risk when measuring those assets. ASU 2022-01 expands the scope of this guidance to allow entities to apply the portfolio layer method to portfolios of all financial assets, including both prepayable and nonprepayable financial assets. This scope expansion is consistent with the FASB’s efforts to simplify hedge accounting and allows entities to apply the same method to similar hedging strategies. Also, ASU 2022-01 expands the current model to explicitly allow entities to designate multiple layers in a single portfolio as individual hedged items. This allows entities to designate multiple hedging relationships with a single closed portfolio, and therefore a larger portion of the interest rate risk associated with such a portfolio is eligible to be hedged. ASU 2022-01 also addresses questions about the types of derivatives that could be used as the hedging instrument in potential multiple-layer hedges. ASU 2022-01, an entity has the flexibility to use any type of derivative or combination of derivatives (e.g., spot-starting constant-notional swaps with different term lengths, a combination of spot-starting and forward-starting constant-notional swaps, amortizing-notional swaps) by applying the multiple-layer model that aligns with its risk management strategy. ASU 2022-01 expands and clarifies the current guidance on accounting for fair value hedge basis adjustments under the portfolio layer method for both single-layer and multiple-layer hedges. For public business entities, ASU 2022-01 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted if an entity has adopted ASU 2017-12. The Company continues to assess the impact that this guidance will have on the Company’s consolidated financial statements. .
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 transition 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
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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 continues to assess the impacts of this guidance, and has not determined whether LIBOR transition and this guidance will have a material effect on the Company's business operations and consolidated financial statements.

Note 8. 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 at default includes an estimated drawdown of unused credit based on historical credit utilization factors and current loss factors, resulting in a proportionate amount of expected credit losses.
For the three months ended March 31, 2022, the Company recorded a $2.4 million benefit to the provision for credit losses for off-balance sheet credit exposures compared to an $875,000 benefit to the provision for credit losses for off-balance sheet credit exposures for the same period in 2021. The increase in the period-over period provision benefit was primarily due to an increase in line of credit utilization.
The allowance for credit losses for off-balance sheet credit exposures was $4.1 million and $6.5 million at March 31, 2022 and December 31, 2021, respectively, and are included in other liabilities on the Consolidated Statements of Financial Condition.
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Note 9. 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.
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 March 31, 2022 and December 31, 2021.
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
27

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 comprehensive (loss) income, and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects 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 March 31, 2022 and December 31, 2021.
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 March 31, 2022 and December 31, 2021.
The following tables present the assets and liabilities reported on the consolidated statements of financial condition at their fair values as of March 31, 2022 and December 31, 2021, by level within the fair value hierarchy (in thousands):

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Fair Value Measurements at Reporting Date Using:
March 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$260,165 260,165 — — 
Mortgage-backed securities1,670,464 — 1,670,464 — 
Asset-backed securities44,936 — 44,936 — 
State and municipal obligations63,846 — 63,846 — 
Corporate obligations32,926 — 32,926 — 
Total available for sale debt securities2,072,337 260,165 1,812,172 — 
Equity securities1,256 1,256 — — 
Derivative assets79,231 — 79,231 — 
$2,152,824 261,421 1,891,403 — 
Derivative liabilities$60,644 — 60,644 — 
Measured on a non-recurring basis:
Loans measured for impairment based on the fair value of the underlying collateral$16,173 — — 16,173 
Foreclosed assets8,578 — — 8,578 
$24,751 — — 24,751 

Fair Value Measurements at Reporting Date Using:
December 31, 2021Quoted 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$196,329 196,329 — — 
Mortgage-backed securities1,708,831 — 1,708,831 — 
Asset-backed securities46,797 — 46,797 — 
State and municipal obligations69,707 — 69,707 — 
Corporate obligations36,187 — 36,187 — 
Total available for sale debt securities2,057,851 196,329 1,861,522 — 
Equity Securities1,325 1,325 — — 
Derivative assets65,903 — 65,903 — 
$2,125,079 197,654 1,927,425 — 
Derivative liabilities$61,412 — 61,412 — 
Measured on a non-recurring basis:
Loans measured for impairment based on the fair value of the underlying collateral$18,237 — — 18,237 
Foreclosed assets8,731 — — 8,731 
$26,968 — — 26,968 
There were no transfers between Level 1, Level 2 and Level 3 during the three months ended March 31, 2022.
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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. Included in cash and cash equivalents at March 31, 2022 and December 31, 2021 was $4.8 million and $27.3 million, respectively, representing cash collateral pledged to secure loan level swaps 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.
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
30

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 March 31, 2022 and December 31, 2021. Fair values are presented by level within the fair value hierarchy.

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Fair Value Measurements at March 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$433,146 433,146 433,146 — — 
Available for sale debt securities:
U.S. Treasury obligations260,165 260,165 260,165 — — 
Mortgage-backed securities1,670,464 1,670,464 — 1,670,464 — 
Asset-backed securities44,936 44,936 — 44,936 — 
State and municipal obligations63,846 63,846 — 63,846 — 
Corporate obligations32,926 32,926 — 32,926 — 
Total available for sale debt securities$2,072,337 2,072,337 260,165 1,812,172 — 
Held to maturity debt securities, net of allowance for credit losses:
US Treasury obligations1,430 1,430 1,430 — — 
Agency obligations9,997 9,375 9,375 — — 
Mortgage-backed securities13 13 — 13 — 
State and municipal obligations400,606 397,415 — 397,415 — 
Corporate obligations9,912 9,431 — 9,431 — 
Total held to maturity debt securities, net of allowance for credit losses$421,958 417,664 10,805 406,859 — 
FHLBNY stock23,973 23,973 23,973 — — 
Equity Securities1,256 1,256 1,256 — — 
Loans, net of allowance for credit losses9,586,607 9,586,361 — — 9,586,361 
Derivative assets79,231 79,231 — 79,231 — 
Financial liabilities:
Deposits other than certificates of deposits$10,674,432 10,674,432 10,674,432 — — 
Certificates of deposit691,655 690,591 — 690,591 — 
Total deposits$11,366,087 11,365,023 10,674,432 690,591 — 
Borrowings399,606 386,705 — 386,705 — 
Subordinated debentures10,336 9,594 — 9,594 — 
Derivative liabilities60,644 60,644 — 60,644 — 
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Fair Value Measurements at December 31, 2021 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$712,463 712,463 712,463 — — 
Available for sale debt securities:
U.S. Treasury obligations196,329 196,329 196,329 — — 
Mortgage-backed securities1,708,831 1,708,831 — 1,708,831 — 
Asset-backed securities46,797 46,797 — 46,797 — 
State and municipal obligations69,707 69,707 — 69,707 — 
Corporate obligations36,187 36,187 — 36,187 — 
Total available for sale debt securities$2,057,851 2,057,851 196,329 1,861,522 — 
Held to maturity debt securities:
Agency obligations$9,996 9,821 9,821 — — 
Mortgage-backed securities21 21 — 21 — 
State and municipal obligations415,699 429,552 — 429,552 — 
Corporate obligations10,434 10,315 — 10,315 — 
Total held to maturity debt securities$436,150 449,709 9,821 439,888 — 
FHLBNY stock34,290 34,290 34,290 — — 
Equity Securities1,325 1,325 1,325 — — 
Loans, net of allowance for credit losses9,500,884 9,607,225 — — 9,607,225 
Derivative assets65,903 65,903 — 65,903 — 
Financial liabilities:
Deposits other than certificates of deposits$10,541,497 10,541,497 10,541,497 — — 
Certificates of deposit692,515 694,041 — 694,041 — 
Total deposits$11,234,012 11,235,538 10,541,497 694,041 — 
Borrowings626,774 625,636 — 625,636 — 
Subordinated debentures10,283 9,750 — 9,750 — 
Derivative liabilities61,412 61,412 — 61,412 — 

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Note 10. Other Comprehensive Income (Loss)
The following table presents the components of other comprehensive loss, both gross and net of tax, for the three months ended March 31, 2022 and 2021 (in thousands):
Three months ended March 31,
20222021
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 arising during the period$(116,081)31,110 (84,971)(12,152)3,133 (9,019)
Reclassification adjustment for gains included in net income— — — (230)59 (171)
Total(116,081)31,110 (84,971)(12,382)3,192 (9,190)
Unrealized gains on derivatives (cash flow hedges) 14,260 (3,822)10,438 6,226 (1,605)4,621 
Amortization related to post-retirement obligations(378)102 (276)(150)41 (109)
Total other comprehensive (loss) income$(102,199)27,390 (74,809)(6,306)1,628 (4,678)
The following tables present the changes in the components of accumulated other comprehensive (loss) income, net of tax, for the three months ended March 31, 2022 and 2021 (in thousands):

Changes in Accumulated Other Comprehensive (Loss) Income by Component, net of tax
for the three months ended March 31,
20222021
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,		$(211)2,981 4,093 6,863 23,690 (1,081)(4,954)17,655 
Current - period other comprehensive (loss)(84,971)(276)10,438 (74,809)(9,190)(109)4,621 (4,678)
Balance at March 31,$(85,182)2,705 14,531 (67,946)14,500 (1,190)(333)12,977 

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The following tables summarize the reclassifications from accumulated other comprehensive income (loss) to the consolidated statements of income for the three and three months ended March 31, 2022 and 2021 (in thousands):
Reclassifications From Accumulated Other Comprehensive
Income ("AOCI")
Amount reclassified from AOCI for the three months ended March 31,Affected line item in the Consolidated
Statement of Income
20222021
Details of AOCI:
Available for sale debt securities:
Realized net gains on the sale of securities available for sale$— (230)Net gain on securities transactions
— 59 Income tax expense
— (171)Net of tax
Cash flow hedges:
Unrealized losses on derivatives666 879 Interest expense
(178)(227)Income tax expense
488 652 
Post-retirement obligations:
Amortization of actuarial gains $(326)(150)
Compensation and employee benefits (1)
87 41 Income tax expense
$(239)(109)Net of tax
Total reclassifications$249 372 Net of tax
(1) This item is included in the computation of net periodic benefit cost. See Note 6. Components of Net Periodic Benefit Cost.

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Note 11. 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 March 31, 2022 and December 31, 2021, the Company had 166 loan related interest rate swaps, with an aggregate notional amount of $2.43 billion and $2.42 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. At March 31, 2022 and December 31, 2021, the Company had 13 credit derivatives, with aggregate notional amounts of $147.2 million and $144.8 million, respectively, from participations in interest rate swaps as part of these loan participation arrangements. At March 31, 2022 and December 31, 2021, the fair value of these credit derivatives were $77,700 and $108,800, respectively.
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 months ended March 31, 2022 and 2021, such derivatives were used to hedge the variable cash outflows associated with FHLBNY borrowings and brokered demand deposits.
Amounts reported in accumulated other comprehensive (loss) 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 $4.9 million will be reclassified as a reduction to interest expense. As of March 31, 2022, the Company had 13 outstanding interest rate derivatives with an aggregate notional amount of $500.0 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 Financial Condition at March 31, 2022 and December 31, 2021 (in thousands).
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Fair Values of Derivative Instruments as of March 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$1,200,002 Other assets$59,907 $1,200,002 Other liabilities$60,594 
Credit contracts33,621 Other assets56 99,741 Other liabilities32 
Total derivatives not designated as a hedging instrument59,963 60,626 
Derivatives designated as a hedging instrument:
Interest rate products460,000 Other assets19,207 20,000 Other liabilities60 
Total gross derivative amounts recognized on the balance sheet79,170 60,686 
Gross amounts offset on the balance sheet— — 
Net derivative amounts presented on the balance sheet$79,170 $60,686 
Gross amounts not offset on the balance sheet:
Financial instruments - institutional counterparties$5,558 $5,558 
Cash collateral - institutional counterparties (1)
62,840 4,630 
Net derivatives not offset$10,772 $50,498 
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Fair Values of Derivative Instruments as of December 31, 2021
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$1,188,703 Other assets$59,110 $1,188,703 Other liabilities$60,163 
Credit contracts33,683 Other assets76 97,213 Other liabilities46 
Total derivatives not designated as a hedging instrument59,186 60,209 
Derivatives designated as a hedging instrument:
Interest rate products250,000 Other assets7,278 350,000 Other liabilities2,263 
Total gross derivative amounts recognized on the balance sheet66,464 62,472 
Gross amounts offset on the balance sheet— — 
Net derivative amounts presented on the balance sheet$66,464 $62,472 
Gross amounts not offset on the balance sheet:
Financial instruments - institutional counterparties$18,618 $18,618 
Cash collateral - institutional counterparties (1)— 26,566 
Net derivatives not offset$47,846 $17,288 
(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 March 31, 2022 and December 31, 2021.
The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income during the three months ended March 31, 2022 and 2021 (in thousands).
Gain recognized in income on derivatives for the three months ended
Consolidated Statements of IncomeMarch 31, 2022March 31, 2021
Derivatives not designated as a hedging instrument:
Interest rate productsOther income$366 400 
Credit contractsOther income(17)23 
Total$349 423 
Consolidated Statements of IncomeLoss recognized in expense on derivatives for the three months ended
March 31, 2022March 31, 2021
Derivatives designated as a hedging instrument:
Interest rate productsInterest expense$666 879 
Total$666 879 
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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 March 31, 2022, the Company had four dealer counterparties. The Company had a net liability position with respect to one of the counterparties. The termination value for this net liability position, which includes accrued interest, was $5.6 million at March 31, 2022. The Company has minimum collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $4.8 million against its obligations under these agreements. If the Company had breached any of these provisions at March 31, 2022, it could have been required to settle its obligations under the agreements at the termination value.
Note 12. 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 the three months ended March 31, 2022, and 2021 the out-of-scope revenue related to financial instruments was 83.4% and 82.3%, respectively, of the Company's total revenue. 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 months ended March 31, 2022 and 2021 (in thousands):
Three months ended March 31,
20222021
Non-interest income
In-scope of Topic 606:
Wealth management fees$7,466 7,134 
Insurance agency income3,420 2,727 
Banking service charges and other fees:
Service charges on deposit accounts2,960 2,497 
Debit card and ATM fees770 1,778 
Total banking service charges and other fees3,730 4,275 
Total in-scope non-interest income14,616 14,136 
Total out-of-scope non-interest income5,532 7,501 
Total non-interest income$20,148 21,637 
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,
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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.
Note 13. Leases
The following table represents the consolidated statements of financial condition classification of the Company’s right-of use-assets and lease liabilities at March 31, 2022 and December 31, 2021 (in thousands):
ClassificationMarch 31, 2022December 31, 2021
Lease Right-of-Use Assets:
Operating lease right-of-use assetsOther assets$65,417 $48,808 
Lease Liabilities:
Operating lease liabilitiesOther liabilities$67,227 $50,236 
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. Generally, the Company considers the first renewal option to be reasonably certain and includes it 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 March 31, 2022, the weighted-average remaining lease term and the weighted-average discount rate for the Company's operating leases were 9.2 years and 2.50%, 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):
For the Three Months Ended
March 31, 2022March 31, 2021
Lease Costs:
Operating lease cost $2,807 $2,812 
Variable lease cost 718 803 
Total lease cost$3,525 $3,615 

For the Three Months Ended
March 31, 2022March 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$1,939 $2,345 
During the three months ended March 31, 2022, the Company added one new lease obligation related to the Company's new administrative office location in Iselin, New Jersey. The Company recorded a right-of-use asset and lease liability of $16.0 million for this lease obligation.
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Future minimum payments for operating leases with initial or remaining terms of one year or more as of March 31, 2022, were as follows (in thousands):
Operating leases
Twelve months ended:
Remainder of 2022$6,625 
20239,167 
20249,004 
20258,466 
20267,267 
Thereafter35,208 
Total future minimum lease payments75,737 
Amounts representing interest8,510 
Present value of net future minimum lease payments$67,227 

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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 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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, 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 and the availability of and costs associated with sources of liquidity.
In addition, the COVID-19 pandemic continues to have an uncertain impact on the Company, its customers and the communities it serves. Given its ongoing and dynamic nature, including potential variants, it is difficult to predict the continuing impact of the pandemic on the Company's business, financial condition or results of operations. The extent of such impact will depend on future developments, which remain highly uncertain, including when the pandemic will be controlled and abated, and the extent to which the economy can remain open. As the result of the pandemic and the related adverse local and national economic consequences, the Company could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations: the demand for our products and services may decline, making it difficult to grow assets and income; if the economy is unable to remain substantially open, loan delinquencies, problem assets, and foreclosures may increase, resulting in increased charges and reduced income; collateral for loans, especially real estate, may decline in value, which could cause loan losses to increase; our allowance for credit losses may increase if borrowers experience financial difficulties, which will adversely affect our net income; the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us; our wealth management revenues may decline with continuing market turmoil; we may face the risk of a goodwill write-down due to stock price decline; and our cyber security risks are increased as the result of an increased number of employees working remotely.
The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date 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 have any obligation to update any forward-looking statements to reflect events or circumstances after the date of this statement.
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 following as critical accounting policies:
•Valuation of the allowance for credit losses; and
•Valuation of deferred tax assets
On January 1, 2020, the Company adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments,” which replaced the incurred loss methodology with the current expected credit loss (“CECL”) methodology. 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, or credited 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.
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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 troubled debt restructuring (“TDR”) 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.
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 March 31, 2022, 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, or if the loan was modified as a TDR.
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.
A loan for which the terms have been modified resulting in a concession by the Company, and for which the borrower is experiencing financial difficulties is considered to be a TDR. The allowance for credit losses on a TDR is measured using the
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same method as all other impaired loans, except that the original interest rate is used to discount the expected cash flows, not the rate specified within the restructuring.
For loans acquired that have experienced more-than-insignificant deterioration in credit quality since their origination are considered Purchased Credit Deteriorated ("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) troubled debt restructured 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. As the impact of COVID-19 continues, the effectiveness of medical advances, government programs, and the resulting impact on consumer behavior and employment conditions will have a material bearing on future credit conditions. 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. In addition to the ongoing impact of COVID-19, illiquid credit markets, volatile securities markets, and declines in the housing and commercial real estate markets and the economy in general may increase the uncertainty inherent in such estimates and assumptions. 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. See Note 3 to the Consolidated Financial Statements for more information on the allowance for credit losses on loans.
The determination of whether deferred tax assets will be realizable is predicated on the reversal of existing deferred tax liabilities and estimates of future taxable income. Such estimates are subject to management’s judgment. A valuation allowance is established when management is unable to conclude that it is more likely than not that it will realize deferred tax assets based on the nature and timing of these items. The Company did not require a valuation allowance at March 31, 2022 or December 31, 2021.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 2022 AND DECEMBER 31, 2021
Total assets at March 31, 2022 were $13.62 billion, a $164.2 million decrease from December 31, 2021. The decrease in total assets was primarily due to a $279.3 million decrease in cash and cash equivalents and a $10.1 million decrease in total investments, partially offset by an $81.3 million increase in total loans.
The Company’s loan portfolio increased $81.3 million to $9.66 billion at March 31, 2022, from $9.58 billion at December 31, 2021. For the three months ended March 31, 2022, loan funding, including advances on lines of credit, totaled $959.4 million, compared with $770.5 million for the same period in 2021. Total Paycheck Protection Program ("PPP") loans outstanding decreased $66.0 million to $28.9 million at March 31, 2022, from $94.9 million at December 31, 2021. Excluding the net decrease in PPP loans, during the three months ended March 31, 2022, the Company experienced net increases in commercial
44

mortgage loans, multi-family loans, construction loans and commercial loans of $109.8 million, $30.4 million, $16.2 million and $8.5 million, respectively, partially offset by net decreases in consumer loans and residential mortgage loans of $10.9 million and $8.0 million, respectively. Commercial real estate, commercial and construction loans represented 84.4% of the total loan portfolio at March 31, 2022, compared to 84.1% at December 31, 2021.
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 $192.7 million and $107.8 million, respectively, at March 31, 2022, compared to $167.1 million and $78.5 million, respectively, at December 31, 2021. No SNC relationships were 90 days or more delinquent at March 31, 2022.
The Company had outstanding junior lien mortgages totaling $137.0 million at March 31, 2022. Of this total, eight loans totaling $385,000 were 90 days or more delinquent with an allowance for credit losses of $6,000.
The following table sets forth information regarding the Company’s non-performing assets as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Mortgage loans:
Residential$5,396 6,072 
Commercial19,533 16,887 
Multi-family2,053 439 
Construction2,366 2,365 
Total mortgage loans29,348 25,763 
Commercial loans13,793 20,582 
Consumer loans1,171 1,682 
Total non-performing loans44,312 48,027 
Foreclosed assets8,578 8,731 
Total non-performing assets$52,890 56,758 
The following table sets forth information regarding the Company’s 60-89 day delinquent loans as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022December 31, 2021
Mortgage loans:
Residential$1,354 1,131 
Commercial— 3,960 
Multi-family— — 
Construction — — 
Total mortgage loans1,354 5,091 
Commercial loans318 1,289 
Consumer loans90 228 
Total 60-89 day delinquent loans$1,762 6,608 
At March 31, 2022, the Company’s allowance for credit losses related to the loan portfolio was 0.79% of total loans, compared to 0.84% and 0.87% at December 31, 2021 and March 31, 2021, respectively. The Company recorded a provision benefit for credit losses on loans of $6.4 million for the three months ended March 31, 2022 compared with a benefit of $15.0 million for the three months ended March 31, 2021. For the three months ended March 31, 2022, the Company had net recoveries of $1.9 million, compared to net charge-offs of $875,000 for the same period in 2021. The allowance for credit losses decreased $4.5 million to $76.3 million at March 31, 2022 from $80.7 million at December 31, 2021. The decrease in the period-over-period provision benefit was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period.
Total non-performing loans were $44.3 million, or 0.46% of total loans at March 31, 2022, compared to $48.0 million, or 0.50% of total loans at December 31, 2021. The $3.7 million decrease in non-performing loans consisted of a $6.8 million decrease in non-performing commercial loans, a $676,000 decrease in non-performing residential mortgage loans and a
45

$511,000 decrease in non-performing consumer loans, partially offset a $2.6 million increase in non-performing commercial mortgage loans.
At March 31, 2022 and December 31, 2021, the Company held foreclosed assets of $8.6 million and $8.7 million, respectively. During the three months ended March 31, 2022, there was one addition to foreclosed assets with an aggregate carrying value of $47,000 and a valuation charge of $200,000. Foreclosed assets at March 31, 2022 consisted primarily of commercial real estate. Total non-performing assets at March 31, 2022 decreased $3.9 million to $52.9 million, or 0.39% of total assets, from $56.8 million, or 0.41% of total assets at December 31, 2021.
Cash and cash equivalents were $433.1 million at March 31, 2022, a $279.3 million decrease from December 31, 2021, which was attributable to the deployment of excess liquidity into commercial loans and available for sale debt securities combined with the repayment of certain wholesale borrowings.
Total investments were $2.52 billion at March 31, 2022, a $10.1 million decrease from December 31, 2021. This decrease was largely due to an increase in unrealized losses on available for sale debt securities, 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.
Total deposits increased $132.1 million during the three months ended March 31, 2022, to $11.37 billion. Total savings and demand deposit accounts increased $132.9 million to $10.67 billion at March 31, 2022, while total time deposits decreased $860,000 to $691.7 million at March 31, 2022. The increase in savings and demand deposits was largely attributable to a $59.5 million increase in non-interest bearing demand deposits, a $59.6 million increase in money market deposits and a $30.1 million increase in savings deposits, partially offset by a $16.2 million decrease in interest bearing demand deposits. The decrease in time deposits was primarily due to maturities of longer-term retail time deposits, partially offset by an increase in brokered time deposits.
Borrowed funds decreased $227.2 million during the three months ended March 31, 2022, to $399.6 million. The decrease in borrowings for the period was largely due to the maturity and replacement of FHLB borrowings with lower-costing brokered deposits and retail deposits. Borrowed funds represented 2.9% of total assets at March 31, 2022, a decrease from 4.5% at December 31, 2021.
Stockholders’ equity decreased $76.0 million during the three months ended March 31, 2022, to $1.62 billion, primarily due to dividends paid to stockholders, common stock repurchases and an increase in unrealized losses on available for sale debt securities, partially offset by net income earned for the period. For the three months ended March 31, 2022, common stock repurchases totaled 1,282,075 shares at an average cost of $23.36 per share, of which 40,463 shares, at an average cost of $23.56 per share, were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. At March 31, 2022, approximately 1.9 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, deposit outflows and operating expenses. Sources of funds include scheduled amortization of loans, loan prepayments, scheduled maturities of unpledged investments, cash flows from mortgage-backed 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, the COVID-19 pandemic and related government response and the competitive marketplace can influence loan prepayments, prepayments on mortgage-backed securities and deposit flows.
In response to the COVID-19 pandemic, the Company has escalated the monitoring of deposit behavior, utilization of credit lines, and borrowing capacity with the FHLBNY and FRBNY, and is enhancing its collateral position with these funding sources.
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
46

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 March 31, 2022, the Bank and the Company exceeded all current minimum regulatory capital requirements as follows:
March 31, 2022
RequiredRequired with Capital Conservation BufferActual
AmountRatioAmountRatioAmountRatio
(Dollars in thousands)
Bank:(1)
Tier 1 leverage capital$529,542 4.00 %$529,542 4.00 %$1,171,128 8.85 %
Common equity Tier 1 risk-based capital480,506 4.50 747,454 7.00 1,171,128 10.97 
Tier 1 risk-based capital640,675 6.00 907,623 8.50 1,171,128 10.97 
Total risk-based capital854,233 8.00 1,121,181 10.50 1,240,068 11.61 
Company:
Tier 1 leverage capital$529,615 4.00 %$529,615 4.00 %$1,248,903 9.43 %
Common equity Tier 1 risk-based capital481,273 4.50 748,647 7.00 1,236,016 11.56 
Tier 1 risk-based capital641,697 6.00 909,071 8.50 1,248,903 11.68 
Total risk-based capital855,596 8.00 1,122,970 10.50 1,317,661 12.32 
(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 MONTHS ENDED MARCH 31, 2022 AND 2021
General. The Company reported net income of $44.0 million, or $0.58 per basic and diluted share for the three months ended March 31, 2022, compared to net income of $48.6 million, or $0.63 per basic and diluted share for the three months ended March 31, 2021.
Net Interest Income. Total net interest income increased $4.5 million to $94.5 million for the quarter ended March 31, 2022, from $90.0 million for the quarter ended March 31, 2021. Interest income for the quarter ended March 31, 2022 increased $458,000 to $101.0 million, from $100.5 million for the same period in 2021. Interest expense decreased $4.1 million to $6.5 million for the quarter ended March 31, 2022, from $10.5 million for the quarter ended March 31, 2021. The increase in net interest income for the three months ended March 31, 2022, was primarily driven by an increase in available for sale debt securities funded by growth in lower-costing core deposits and the reinvestment of PPP loan satisfactions. The increase in net interest income attributable to growth in average earning assets was partially offset by modest compression in the net interest margin. Additionally, fees related to the forgiveness of PPP loans, which are recognized in interest income, decreased $2.9 million to $1.1 million for the three months ended March 31, 2022, compared to $4.0 million for the three months ended March 31, 2021.
For the three months ended March 31, 2022, the net interest margin decreased three basis points to 3.02%, compared to 3.05% for the three months ended March 31, 2021. The weighted average yield on interest earning assets declined 18 basis points to 3.23% for the three months ended March 31, 2022, compared to 3.41% for the three months ended March 31, 2021, while the weighted average cost of interest bearing liabilities decreased 20 basis points to 0.29% for the three months ended March 31, 2022, compared to 0.49% for the same period last year. The average cost of interest bearing deposits decreased 14 basis points to 0.25% for the three months ended March 31, 2022, compared to 0.39% for the same period last year. Average non-interest bearing demand deposits totaled $2.79 billion for the three months ended March 31, 2022, compared with $2.38 billion for the
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three months ended March 31, 2021. The average cost of deposits, including non-interest bearing deposits, was 0.19% for the three months ended March 31, 2022, compared with 0.30% for the three months ended March 31, 2021. The average cost of borrowings for the three months ended March 31, 2022 was 0.86%, compared to 1.12% for the same period last year.
Interest income on loans secured by real estate increased $1.8 million to $63.8 million for the three months ended March 31, 2022, from $62.0 million for the three months ended March 31, 2021. Commercial loan interest income decreased $3.3 million to $22.8 million for the three months ended March 31, 2022, from $26.1 million for the three months ended March 31, 2021. Consumer loan interest income decreased $353,000 to $3.1 million for the three months ended March 31, 2022, from $3.5 million for the three months ended March 31, 2021. For the three months ended March 31, 2022, the average balance of total loans decreased $242.0 million to $9.48 billion, from $9.72 billion for the same period in 2021, primarily due to the forgiveness of PPP loans, partially offset by an increase in average commercial mortgage loans. The average yield on total loans for the three months ended March 31, 2022, increased two basis points to 3.80%, from 3.78% for the same period in 2021.
Interest income on held to maturity debt securities decreased $188,000 to $2.6 million for the quarter ended March 31, 2022, compared to the same period last year. Average held to maturity debt securities decreased $22.3 million to $428.1 million for the quarter ended March 31, 2022, from $450.4 million for the same period last year.
Interest income on available for sale debt securities and FHLBNY stock increased $2.3 million to $8.0 million for the three months ended March 31, 2022, from $5.6 million for the same period last year. The average balance of available for sale debt securities and FHLBNY stock increased $958.4 million to $2.15 billion for the three months ended March 31, 2022.
The average yield on total securities decreased to 1.47% for the three months ended March 31, 2022, compared with 1.70% for the same period in 2021.
Interest expense on deposit accounts decreased $2.2 million to $5.2 million for the quarter ended March 31, 2022, compared with $7.4 million for the quarter ended March 31, 2021. The average cost of interest bearing deposits decreased to 0.25% for the first quarter of 2022, from 0.39% for the three months ended March 31, 2021. For the three months ended March 31, 2022, average interest bearing core deposits, which consist of total savings and demand deposits, increased $1.08 billion, to $7.77 billion, from $6.69 billion for the same period in 2021. The increase in average core deposits for the three months ended March 31, 2022 was largely due to organic growth and government stimulus in the prior year. For the three months ended March 31, 2022, average time deposit account balances decreased $362.2 million, to $680.8 million, from $1.04 billion for the same period in 2021.
Interest expense on borrowed funds decreased $1.6 million to $1.2 million for the quarter ended March 31, 2022, from $2.8 million for the quarter ended March 31, 2021. The average cost of borrowings decreased to 0.86% for the three months ended March 31, 2022, from 1.12% for the three months ended March 31, 2021. Average borrowings decreased $465.6 million to $549.7 million for the quarter ended March 31, 2022, from $1.02 billion for the quarter ended March 31, 2021.
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 $6.4 million provision benefit for credit losses on loans for the three months ended March 31, 2022 compared with a benefit of $15.0 million for the three months ended March 31, 2021. The decrease in the period-over-period provision benefit was largely a function of the relative change in the economic outlook and the significant favorable impact of the post-pandemic recovery in the prior year period.
Non-Interest Income. Non-interest income totaled $20.1 million for the quarter ended March 31, 2022, a decrease of $1.5 million, compared to the same period in 2021. BOLI income decreased $1.4 million to $1.2 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a benefit claim recognized in the prior year and lower equity valuations. Other income decreased $642,000 to $1.2 million for the three months ended March 31, 2022, compared to $1.8 million for the same period in 2021, mainly due to decreases in net gains on sales of loans and net fees on loan-level interest rate swap transactions. Additionally, fee income decreased $303,000 to $6.9 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a decrease in debit card revenue, partially offset by an increase in commercial loan prepayment fees. The decrease in debit card revenue was largely attributable to the interchange transaction
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fee limitation imposed by the Durbin amendment, which became effective for the Company in the third quarter of 2021. Partially offsetting these decreases in non-interest income, insurance agency income increased $693,000 to $3.4 million, for the three months ended March 31, 2022, compared to the same period in 2021, resulting from an increase in contingent commissions. Additionally, wealth management income increased $332,000 to $7.5 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to an increase in the market value of assets under management and new business generation.
Non-Interest Expense. For the three months ended March 31, 2022, non-interest expense totaled $61.9 million, an increase of $33,000, compared to the three months ended March 31, 2021. For the three months ended March 31, 2022, the Company recorded a $2.4 million provision benefit for credit losses for off-balance sheet credit exposures, compared to an $875,000 benefit for the same period in 2021. The increase in the period-over period provision benefit was primarily due to an increase in line of credit utilization. Other operating expenses decreased $736,000 to $9.4 million for the three months ended March 31, 2022, compared to the same period in 2021, largely due to decreases in debit card maintenance, attorney and consulting expenses. In addition, FDIC insurance decreased $565,000 to $1.2 million for the three months ended March 31, 2022, compared to the same period in 2021, primarily due to a decrease in the insurance assessment rate. Partially offsetting these decreases in non-interest expense, compensation and benefits expense increased $1.8 million to $37.1 million for the three months ended March 31, 2022, compared to $35.3 million for the three months ended March 31, 2021, primarily due to an increase in stock-based compensation and an increase in salary expense associated with Company-wide annual merit increases. Data processing expense increased $1.0 million to $5.3 million for the three months ended March 31, 2022, largely due to increases in software subscription expense and online banking costs.
Income Tax Expense. For the three months ended March 31, 2022, the Company’s income tax expense was $15.2 million with an effective tax rate of 25.7%, compared with income tax expense of $16.2 million with an effective tax rate of 25.0% for the three months ended March 31, 2021. The decrease in tax expense for the three months ended March 31, 2022, compared with the same period last year was largely the result of a decrease in taxable income.
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 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 or LIBOR. 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.
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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 March 31, 2022 (dollars in thousands):
Change in interest rates (basis points) - Rate RampNet Interest Income
Dollar AmountDollar ChangePercent Change
-100$378,797 $(12,487)(3.2)%
Static391,284 — — 
+100
397,956 6,672 1.7 
+200
404,336 13,052 3.3 
+300
410,643 19,359 4.9 
The interest rate risk position of the Company remains moderately asset-sensitive notwithstanding the deployment of excess cash into fixed rate longer duration assets, including investment securities and loans during the first quarter of 2022. As a result, the preceding table indicates that, as of March 31, 2022, in the event of a 300 basis point increase in interest rates, whereby rates ramp up evenly over a twelve-month period, net interest income would increase 4.9%, or $19.4 million. In the event of a 100 basis point decrease in interest rates, whereby rates ramp downward evenly over a twelve-month period, net interest income would decrease 3.2%, or $12.5 million over the same period. In this downward rate scenario, rates on deposits have a repricing floor of zero.
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 March 31, 2022 (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
-100$2,096,015 $(140,636)(6.3)%15.0 %(8.8)%
Flat2,236,651 — — 16.4 — 
+100
2,306,711 70,060 3.1 17.4 5.7 
+200
2,346,403 109,752 4.9 18.1 10.2 
+300
2,384,677 148,026 6.6 18.9 14.8 
The preceding table indicates that as of March 31, 2022, in the event of an immediate and sustained 300 basis point increase in interest rates, the present value of equity is projected to increase 6.6%, or $148.0 million. If rates were to decrease 100 basis points, the present value of equity would decrease 6.3%, or $140.6 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
There were no changes to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
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)
January 1, 2022 through January 31, 202238,169 $23.49 38,169 3,141,574 
February 1, 2022 through February 28, 2022163,423 23.12 163,423 2,978,151 
March 1, 2022 through March 31, 20221,080,483 23.40 1,080,483 1,897,668 
Total1,282,075 23.36 1,282,075 
(1) On December 28, 2020, 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.
None






Item 6.
Exhibits.
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The following exhibits are filed herewith:
2.1
3.1
3.2
4.1
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 March 31, 2022, 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 March 31, 2022, 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:May 10, 2022By:/s/ Anthony J. Labozzetta
Anthony J. Labozzetta
President and Chief Executive Officer (Principal Executive Officer)
Date:May 10, 2022By:/s/ Thomas M. Lyons
Thomas M. Lyons
Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Date:May 10, 2022By:/s/ Frank S. Muzio
Frank S. Muzio
Executive Vice President and Chief Accounting Officer

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What is the market capitalization of a company?

The market capitalization sometimes referred as Marketcap, is the value of a publicly listed company.
In most cases it can be easily calculated by multiplying the share price with the amount of outstanding shares.

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