Provident Financial Services Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 12:22
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
Forward-Looking Statements
Certain statements contained herein are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements may be identified by reference to a future period or periods, or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "estimate," "project," "intend," "anticipate," "continue," or similar terms or variations on those terms, or the negative of those terms. Forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, those set forth in Item 1A of the Company's Annual Report on Form 10-K, as supplemented by its Quarterly Reports on Form 10-Q, and those related to the economic environment, particularly in the market areas in which the Company operates, inflation and unemployment, competitive products and pricing, real estate values, fiscal and monetary policies of the U.S. government, tariffs, changes in accounting policies and practices that may be adopted by the regulatory agencies and the accounting standards setters, changes in government regulations affecting financial institutions, including regulatory fees and capital requirements, changes in prevailing interest rates, potential goodwill impairment, acquisitions and the integration of acquired businesses, credit risk management, asset-liability management, the financial and securities markets, the availability of and costs associated with sources of liquidity, and the impact of the current federal government shutdown.
The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date they are made. The Company advises readers that the factors listed above could affect the Company's financial performance and could cause the Company's actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements. The Company does not assume any duty, and does not undertake, to update any forward-looking statements to reflect events or circumstances after the date of this statement.
Lakeland Bancorp, Inc. Merger
On May 16, 2024, the Company completed its merger with Lakeland Bancorp, Inc. ("Lakeland"), which added $10.59 billion to total assets, $7.91 billion to total loans, $8.62 billion to total deposits and 68 full-service banking offices in New Jersey and New York. The Company closed 13 of the acquired Lakeland banking offices and nine legacy Bank branches in the third quarter of 2024 due to geographic overlap.
Under the merger agreement, each share of Lakeland common stock was converted into the right to receive 0.8319 shares of the Company's common stock, a total of 54,356,954 shares converted, plus cash in lieu of fractional shares. The total consideration paid for the acquisition of Lakeland was $876.8 million. In connection with the acquisition, Lakeland Bank, a wholly-owned subsidiary of Lakeland, was merged with and into the Bank.
The acquisition was accounted for under the acquisition method of accounting. Under this method of accounting, the purchase price has been allocated to the respective assets acquired and liabilities assumed based upon their estimated fair values, net of tax. The excess of consideration paid over the estimated fair value of the net assets acquired totaled $190.9 million and was recorded as goodwill. ASC 805 provides for a period of time during which the acquirer may adjust the provisional amounts recognized at the acquisition date to their subsequently determined acquisition-date fair values, referred to as the "measurement period." Adjustments during the measurement period are not limited to just those relating to assets acquired and liabilities assumed but apply to all aspects of business combination accounting (e.g., the consideration transferred). Measurement-period adjustments are calculated as if they were known at the acquisition date, but are recognized in the reporting period in which they are determined. Prior period information is not revised, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. In accordance with ASC 805, during 2024 the Company recorded a measurement period adjustment and decreased goodwill by $10.5 million to $180.4 million, related to finalizing the valuation.
While there were no merger-related expenses with Lakeland for the 2025 period, these costs totaled $15.6 million and $36.7 million for the three and nine months ended September 30, 2024. Merger-related expense is a separate line in non-interest expense on the Consolidated Statements of Income. Additionally, an initial CECL provision for credit losses of $60.1 million was recorded as part of the Lakeland merger, for the nine months ended September 30, 2024.
Critical Accounting Policies
The Company considers certain accounting policies to be critically important to the fair presentation of its financial condition and results of operations. These policies require management to make complex judgments on matters which by their nature have elements of uncertainty. The sensitivity of the Company's consolidated financial statements to these critical accounting policies, and the assumptions and estimates applied, could have a significant impact on its financial condition and results of operations. These assumptions, estimates and judgments made by management can be influenced by a number of factors, including the general economic environment. The Company has identified the allowance for credit losses on loans as a critical accounting policy.
The allowance for credit losses is a valuation account that reflects management's evaluation of the current expected credit losses in the loan portfolio. The Company maintains the allowance for credit losses through provisions for credit losses that are charged to income. Charge-offs against the allowance for credit losses are taken on loans where management determines that the collection of loan principal and interest is unlikely. Recoveries made on loans that have been charged-off are credited to the allowance for credit losses.
The calculation of the allowance for credit losses is a critical accounting policy of the Company. Management estimates the allowance balance using relevant available information, from internal and external sources, related to past events, current conditions, and a reasonable and supportable forecast. Historical credit loss experience for both the Company and peers provides the basis for the estimation of expected credit losses, where observed credit losses are converted to probability of default rate ("PDR") curves through the use of segment-specific loss given default ("LGD") risk factors that convert default rates to loss severity based on industry-level, observed relationships between the two variables for each segment, primarily due to the nature of the underlying collateral. These risk factors were assessed for reasonableness against the Company's own loss experience and adjusted in certain cases when the relationship between the Company's historical default and loss severity
deviate from that of the wider industry. The historical PDR curves, together with corresponding economic conditions, establish a quantitative relationship between economic conditions and loan performance through an economic cycle.
Using the historical relationship between economic conditions and loan performance, management's expectation of future loan performance is incorporated using an externally developed economic forecast. This forecast is applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model will revert to long-term average economic conditions using a straight-line, time-based methodology. The Company's current forecast period is six quarters, with a four-quarter reversion period to historical average macroeconomic factors. The Company's economic forecast is approved by the Company's ACL Committee.
The allowance for credit losses is measured on a collective (pool) basis, with both a quantitative and qualitative analysis that is applied on a quarterly basis, when similar risk characteristics exist. The respective quantitative allowance for each loan segment is measured using an econometric, discounted PDR/LGD modeling methodology in which distinct, segment-specific multi-variate regression models are applied to an external economic forecast. Under the discounted cash flows methodology, expected credit losses are estimated over the effective life of the loans by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for modeled cash flows, adjusted for modeled defaults and expected prepayments and discounted at the loan-level effective interest rate. The contractual term excludes expected extensions, renewals and modifications unless either of the following applies at the reporting date: management has a reasonable expectation that a modification will be executed with an individual borrower; or when an extension or renewal option is included in the original contract and is not unconditionally cancellable by the Company. Management will assess the likelihood of the option being exercised by the borrower and appropriately extend the maturity for modeling purposes.
The Company considers qualitative adjustments to credit loss estimates for information not already captured in the quantitative component of the loss estimation process. Qualitative factors are based on portfolio concentration levels, model imprecision, changes in industry conditions, changes in the Company's loan review process, changes in the Company's loan policies and procedures, and economic forecast uncertainty.
One of the most significant judgments involved in estimating the Company's allowance for credit losses on loans relates to the macroeconomic forecasts used to estimate expected credit losses over the forecast period. As of September 30, 2025, the model incorporated Moody's baseline economic forecast, as adjusted for qualitative factors, as well as an extensive review of classified loans and loans that were classified as impaired with a specific reserve assigned to those loans. The allowance estimation process resulted in a provision of $4.5 million and $2.2 million for the three and nine months ended September 30, 2025, and an overall coverage ratio of 97 basis points. Management believes the allowance for credit losses accurately represents the estimated inherent losses, factoring in the qualitative adjustment and other assumptions, including the selection of the baseline forecast within the model. If the Company used a more severe outlook, the provision would have risen by approximately $23.1 million, leading to an overall coverage ratio of approximately 109 basis points.
Portfolio segment is defined as the level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Management developed segments for estimating loss based on type of borrower and collateral which is generally based upon federal call report segmentation. The segments have been combined or sub-segmented as needed to ensure loans of similar risk profiles are appropriately pooled. As of September 30, 2025, 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 & Industrial Loans
•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 Credit, Credit Risk Management and Allowance Committees; or which may be identified through the Company's loan review process. Generally, the Company only evaluates loans individually for impairment if the loan is non-accrual, non-homogeneous and the balance is greater than $1.0 million.
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.
Loans acquired that have experienced more-than-insignificant deterioration in credit quality since their origination are considered PCD loans. The Company evaluates acquired loans for deterioration in credit quality based on any of, but not
limited to, the following: (1) non-accrual status; (2) modification designation; (3) risk ratings of special mention, substandard or doubtful; (4) watchlist credits; and (5) delinquency status, including loans that are current on acquisition date, but had been previously delinquent. At the acquisition date, an estimate of expected credit losses is made for groups of PCD loans with similar risk characteristics and individual PCD loans without similar risk characteristics. Subsequent to the acquisition date, the initial allowance for credit losses on PCD loans will increase or decrease based on future evaluations, with changes recognized in the provision for credit losses.
Management believes the primary risks inherent in the portfolio are a general decline in the economy, a decline in real estate market values, rising unemployment or a protracted period of elevated unemployment, increasing vacancy rates in commercial investment properties and possible increases in interest rates in the absence of economic improvement. Any one or a combination of these events may adversely affect borrowers' ability to repay the loans, resulting in increased delinquencies, credit losses and higher levels of provisions. Management considers it important to maintain the ratio of the allowance for credit losses to total loans at an acceptable level given current and forecasted economic conditions, interest rates and the composition of the portfolio.
The CECL approach to calculate the allowance for credit losses on loans is significantly influenced by the composition, characteristics and quality of the Company's loan portfolio, as well as the prevailing economic conditions and forecast utilized. Although management believes that the Company has established and maintained the allowance for credit losses at appropriate levels, additions may be necessary if future economic and other conditions differ substantially from the current operating environment and economic forecast. Management evaluates its estimates and assumptions on an ongoing basis giving consideration to forecasted economic factors, historical loss experience and other factors. The model includes both quantitative and qualitative components. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods, and to the extent actual losses are higher than management estimates, additional provision for credit losses on loans could be required and could adversely affect our earnings or financial position in future periods. In addition, various regulatory agencies periodically review the adequacy of the Company's allowance for credit losses as an integral part of their examination process. Such agencies may require the Company to recognize additions to the allowance or additional write-downs based on their judgments about information available to them at the time of their examination. Although management uses the best information available, the level of the allowance for credit losses remains an estimate that is subject to significant judgment and short-term volatility.
Material changes to these and other relevant factors create greater volatility to the allowance for credit losses, and therefore, greater volatility to the Company's reported earnings.
Recent Legislation
On July 4, 2025, the One Big Beautiful Bill ("OBBB") was enacted into law. The legislation includes a number of significant tax-related provisions, including changes affecting corporate tax incentives, international tax provisions, and various business credits and deductions.
Pursuant to ASC 740, Income Taxes, the Company will recognize the effects of the OBBB in the third fiscal quarter of 2025, the period in which the legislation was enacted. The Company evaluated the potential impact of the OBBB on its financial statements and, based on its assessment, the legislation does not have a material impact on its financial statements.
COMPARISON OF FINANCIAL CONDITION AS OF SEPTEMBER 30, 2025 AND DECEMBER 31, 2024
Total assets as of September 30, 2025 were $24.83 billion, a $780.9 million increase from December 31, 2024. The increase in total assets was primarily due to a $626.7 million increase in loans held for investment and a $344.3 million increase in total investments, partially offset by a $148.1 million decrease in loans held for sale, and decreases in intangibles and other assets.
The Company's loans held for investment portfolio totaled $19.29 billion as of September 30, 2025 and $18.66 billion as of December 31, 2024. The loan portfolio consisted of the following:
| September 30, 2025 | December 31, 2024 | |||||||||||||
| Mortgage loans: | ||||||||||||||
| Commercial | $ | 7,318,725 | 7,228,078 | |||||||||||
| Multi-family | 3,534,751 | 3,382,933 | ||||||||||||
| Construction | 719,961 | 823,503 | ||||||||||||
| Residential | 1,977,483 | 2,010,637 | ||||||||||||
| Total mortgage loans | 13,550,920 | 13,445,151 | ||||||||||||
|
Commercial loans (1)
|
4,837,934 | 4,608,600 | ||||||||||||
| Mortgage warehouse lines | 292,133 | 160,928 | ||||||||||||
| Consumer loans | 614,983 | 613,819 | ||||||||||||
| Total gross loans | 19,295,970 | 18,667,570 | ||||||||||||
| Premiums on purchased loans | 1,362 | 1,338 | ||||||||||||
| Net deferred fees and unearned discounts | (11,265) | (9,538) | ||||||||||||
| Total loans held for investment | $ | 19,286,067 | 18,659,370 | |||||||||||
(1) Commercial loans consist of owner-occupied real estate and commercial & industrial loans.
During the three months ended September 30, 2025, the loans held for investment portfolio had net increases of $149.0 million of commercial loans, $52.0 million of mortgage warehouse lines, $17.2 million of multi-family loans and $4.8 million of commercial mortgage loans, partially offset by net decreases of $32.0 million of construction loans, $7.9 million of residential mortgage loans and $2.2 million of consumer loans. Total commercial loans, including mortgage warehouse lines, commercial mortgage, multi-family and construction loans, represented 86.6% of the loan portfolio as of September 30, 2025, compared to 85.9% as of December 31, 2024.
The Bank's lending activities, though concentrated in the communities surrounding its offices, extend predominantly throughout New Jersey, eastern Pennsylvania and Orange, Nassau and Queens Counties, New York. This geographic concentration subjects the Company's loan portfolio to the general economic conditions within these states. The risks created by this concentration are evaluated by management as part of its risk management program.
We consider our commercial real estate loans to be higher risk categories in our loan portfolio. These loans are particularly sensitive to economic conditions. As of September 30, 2025, our portfolio of commercial real estate loans, including multi-family and construction loans, totaled $11.57 billion, or 60.0% of total gross loans.
The Company believes the CRE loans it originates are appropriately collateralized under its credit standards. Collateral properties include multi-family apartment buildings, warehouse/distribution buildings, shopping centers, office buildings, mixed-use buildings, hotels/motels, senior living, residential and commercial tract developments, and raw land or lots to be developed into single-family homes. The primary source of repayment on the permanent loan portion of these loans is generally expected to come from the cash flow stream of the underlying leases which are dependent on the successful operations of the respective tenants. The primary source of the repayment on the construction portfolio is dependent on the successful completion of the project and the related sale, permanent financing or lease of the real property collateral. As a result, the performance of these loans is generally impacted by fluctuations in collateral values, the ability of the borrower to obtain permanent financing, and, in the case of loans to residential builders/developers, volatility in consumer demand.
The table below summarizes the concentrations of CRE loans on a gross basis, not including any purchase accounting adjustments, based on the collateral securing the loans, as of September 30, 2025 (in thousands):
| Amount | Percentage of Total | ||||||||||
| Multi-family | $ | 3,937,340 | 33.7 | % | |||||||
| Retail | 2,634,608 | 22.5 | |||||||||
| Industrial | 2,260,331 | 19.3 | |||||||||
| Mixed | 911,205 | 7.8 | |||||||||
| Office | 798,909 | 6.8 | |||||||||
| Special use property | 634,434 | 5.4 | |||||||||
| Residential | 312,405 | 2.7 | |||||||||
| Hotel | 135,487 | 1.2 | |||||||||
| Land | 75,743 | 0.7 | |||||||||
| Total CRE, multi-family and construction loans | $ | 11,700,462 | 100.0 | % | |||||||
The determination of collateral value is critically important when financing real estate. As a result, obtaining current and objectively prepared appraisals is a major part of the underwriting process. The Company engages a variety of professional firms to supply appraisals, market studies and feasibility reports, environmental assessments and project site inspections to complement its internal resources to underwrite and monitor these credit exposures.
However, in periods of economic uncertainty where real estate market conditions may change rapidly, more current appraisals are obtained when warranted by conditions such as a borrower's deteriorating financial condition, their possible inability to perform on the loan or other indicators of increasing risk of reliance on collateral value as the sole source of repayment of the loan. Annual appraisals are generally obtained for loans graded substandard or worse where real estate is a material portion of the collateral value and/or the income from the real estate or sale of the real estate is the primary source of debt service.
Appraisals are, in substantially all cases, reviewed by a third-party to determine the reasonableness of the appraised value. The third-party reviewer will challenge whether or not the data used is appropriate and relevant, form an opinion as to the appropriateness of the appraisal methods and techniques used, and determine if overall the analysis and conclusions of the appraiser can be relied upon. Additionally, the third-party reviewer provides a detailed report of that analysis. Further review may be conducted by credit or lending teams, including the Bank's commercial workout team as conditions warrant. These additional steps of review are undertaken to confirm that the underlying appraisal and the third-party analysis can be relied upon. If differences arise, management addresses those with the reviewer and determines an appropriate resolution in accordance with its lending policy. Both the appraisal process and the appraisal review process can be less reliable in establishing accurate collateral values during and following periods of economic weakness due to the lack of comparable sales and the limited availability of financing to support an active market of potential purchasers.
The table below summarizes the Company's commercial real estate portfolio, including multi-family and construction loans on a gross basis, not including any purchase accounting adjustments as of September 30, 2025, as segregated by the geographic region in which the property is located (dollars in thousands):
| Amount | Percentage of Total | ||||||||||
| New Jersey | $ | 7,192,517 | 61.5 | % | |||||||
| New York | 1,826,859 | 15.6 | |||||||||
| Pennsylvania | 1,520,191 | 13.0 | |||||||||
| Other states | 1,160,895 | 9.9 | |||||||||
| Total CRE, multi-family and construction loans | $ | 11,700,462 | 100.0 | % | |||||||
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 $171.3 million and $88.4 million, respectively, as of September 30, 2025, compared to $168.4 million and $86.8 million, respectively, as of December 31, 2024.
The following table sets forth information regarding the Company's non-performing assets as of September 30, 2025 and December 31, 2024 (in thousands):
| September 30, 2025 | December 31, 2024 | |||||||||||||
| Mortgage loans: | ||||||||||||||
| Commercial | $ | 39,036 | $ | 20,883 | ||||||||||
| Multi-family | 424 | 7,498 | ||||||||||||
| Construction | 19,220 | 13,246 | ||||||||||||
| Residential | 7,858 | 4,535 | ||||||||||||
| Total mortgage loans | 66,538 | 46,162 | ||||||||||||
|
Commercial loans (1)
|
32,483 | 24,243 | ||||||||||||
| Consumer loans | 1,388 | 1,656 | ||||||||||||
| Total non-performing loans | 100,409 | 72,061 | ||||||||||||
| Foreclosed assets | 2,015 | 9,473 | ||||||||||||
| Total non-performing assets | $ | 102,424 | 81,534 | |||||||||||
(1) Includes $2.4 million of total non-accrual loans held for sale as of December 31, 2024.
The following table sets forth information regarding the Company's 60-89 day delinquent loans as of September 30, 2025 and December 31, 2024 (in thousands):
| September 30, 2025 | December 31, 2024 | |||||||||||||
| Mortgage loans: | ||||||||||||||
| Residential | $ | 6,180 | 5,049 | |||||||||||
| Commercial | 4,314 | 3,954 | ||||||||||||
| Multi-family | 879 | - | ||||||||||||
| Construction | - | - | ||||||||||||
| Total mortgage loans | 11,373 | 9,003 | ||||||||||||
|
Commercial loans (1)
|
1,390 | 2,377 | ||||||||||||
| Consumer loans | 299 | 856 | ||||||||||||
| Total 60-89 day delinquent loans | $ | 13,062 | 12,236 | |||||||||||
1) Includes $2.4 million of 60-89 day delinquent loans held for sale as of December 31, 2024.
As of September 30, 2025, the Company's allowance for credit losses related to the loan portfolio was 0.97% of total loans, compared to 1.04% and 1.02% as of December 31, 2024 and September 30, 2024, respectively. The Company recorded a provision for credit losses on loans of $4.5 million and $2.2 million for the three and nine months ended September 30, 2025, respectively, compared with provisions of $9.6 million and $75.9 million for the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2025, the Company had net charge-offs of $5.4 million and $8.6 million, respectively, compared to net charge-offs of $6.8 million and $9.1 million, respectively, for the same periods in 2024. The allowance for credit losses decreased $6.5 million to $187.0 million as of September 30, 2025 from $193.4 million as of December 31, 2024. The decrease in the allowance for credit losses on loans as of September 30, 2025 compared to December 31, 2024 was due to net charge-offs of $8.7 million, partially offset by a $2.2 million provision for credit losses on loans.
Total non-performing loans were $100.4 million, or 0.52% of total loans as of September 30, 2025, compared to $72.1 million, or 0.39% of total loans as of December 31, 2024. The $28.3 million increase in non-performing loans consisted of an $18.2 million increase in non-performing commercial mortgage loans, an $8.2 million increase in non-performing commercial loans, a $6.0 million increase in non-performing construction loans and a $3.3 million increase in non-performing residential mortgage loans, partially offset by a $7.1 million decrease in non-performing multi-family loans and a $268,000 decrease in non-performing consumer loans.
As of September 30, 2025 and December 31, 2024, the Company held foreclosed assets of $2.0 million and $9.5 million, respectively. During the nine months ended September 30, 2025, there was a write-down of one foreclosed commercial property of $2.7 million based on a contracted sales price. The sale of this property closed in the second quarter of 2025, which reduced foreclosed assets by an additional $5.8 million. During the three and nine months ended September 30, 2025, there was one addition to foreclosed assets with an aggregate carrying value of $1.0 million. Foreclosed assets as of September 30,
2025 were comprised of two commercial properties. Total non-performing assets as of September 30, 2025 increased $20.9 million to $102.4 million, or 0.41% of total assets, from $81.5 million, or 0.34% of total assets as of December 31, 2024.
Total investment securities were $3.57 billion as of September 30, 2025, a $344.3 million increase from December 31, 2024. This increase was primarily due to purchases of mortgage-backed securities and a decrease in unrealized losses on available for sale debt securities.
Total deposits increased $472.4 million during the nine months ended September 30, 2025, to $19.10 billion. Total time deposits increased $196.2 million to $3.36 billion as of September 30, 2025, while total savings and demand deposit accounts increased $276.2 million to $15.73 billion as of September 30, 2025. The increase in time deposits consisted of a $204.3 million increase in brokered time deposits, partially offset by an $7.9 million decrease in retail time deposits. The increase in savings and demand deposits was largely attributable to a $101.7 million decrease in savings deposits and a $37.2 million decrease in non-interest bearing demand deposits, partially offset by a $144.5 million increase in money market deposits and a $270.6 million increase in interest bearing demand deposits.
The Company uses brokered deposits as an alternative source of wholesale funding to cover funding gaps created by asset growth. Within total deposits, brokered deposits totaled $805.9 million and $255.0 million as of September 30, 2025 and December 31, 2024, respectively. Our total estimated uninsured and uncollateralized deposits as of September 30, 2025, were $4.81 billion.
Borrowed funds increased $188.9 million during the nine months ended September 30, 2025, to $2.21 billion. Borrowed funds represented 8.9% of total assets as of September 30, 2025, an increase from 8.4% as of December 31, 2024.
Stockholders' equity increased $165.8 million during the nine months ended September 30, 2025, to $2.77 billion, primarily due to net income earned for the period and a decrease in unrealized losses on available for sale debt securities, partially offset by cash dividends paid to stockholders. For the three and nine months ended September 30, 2025, common stock repurchases totaled 55,826 shares at an average cost of $17.83 per share and 156,570 shares at an average cost of $18.07 per share, respectively, all of which were made in connection with withholding to cover income taxes on the vesting of stock-based compensation. As of September 30, 2025, approximately 816,000 shares remained eligible for repurchase under the current stock repurchase authorization.
Liquidity and Capital Resources.Liquidity refers to the Company's ability to generate adequate amounts of cash to meet financial obligations to its depositors, to fund loans and securities purchases and operating expenses. Sources of funds include scheduled amortization of loans, loan prepayments, scheduled maturities of unpledged investments, cash flows from securities and the ability to borrow funds from FHLBNY, FRBNY and approved broker-dealers.
Cash flows from loan payments and maturing investment securities are fairly predictable sources of funds. Changes in interest rates, local economic conditions and the competitive marketplace can influence loan prepayments, prepayments on mortgage-backed securities and deposit flows. For the nine months ended September 30, 2025 and 2024, loan repayments totaled $6.31 billion and $2.09 billion, respectively.
The Company continues to monitor and focus on depositor behavior and borrowing capacity with FHLBNY and FRBNY, with current borrowing capacity of $4.52 billion and $3.02 billion, respectively, as of September 30, 2025. Our estimated uninsured and uncollateralized deposits as of September 30, 2025 totaled $4.81 billion, or 25.2% of deposits. Our total estimated uninsured deposits, including collateralized deposits as of September 30, 2025, were $10.28 billion. Within time deposits, approximately $691.6 million, or 20.6% was uninsured as of September 30, 2025.
Commercial real estate loans, multi-family loans, commercial loans, one- to four-family residential loans and consumer loans are the primary investments of the Company. Purchasing securities for the investment portfolio is a secondary use of funds and the investment portfolio is structured to complement and facilitate the Company's lending activities and ensure adequate liquidity. Loan originations and purchases totaled $2.04 billion for the nine months ended September 30, 2025, compared to $1.12 billion for the same period in 2024. Purchases for the investment portfolio totaled $647.1 million for the nine months ended September 30, 2025, compared to $422.4 million for the year ended December 31, 2024. As of September 30, 2025, the Bank had outstanding loan commitments to borrowers of $3.82 billion, including undisbursed home equity lines and personal credit lines of $681.9 million.
Total deposits increased $472.4 million during the nine months ended September 30, 2025, to $19.10 billion. Deposit activity is affected by changes in interest rates, competitive pricing and product offerings in the marketplace, local economic conditions, customer confidence and other factors such as stock market volatility. Certificate of deposit accounts that are scheduled to mature within one year totaled $3.25 billion as of September 30, 2025. Based on its current pricing strategy and customer retention experience, the Bank expects to retain a significant share of these accounts. The Bank manages liquidity on a daily basis and expects to have sufficient cash to meet all of its funding requirements.
The Federal Deposit Insurance Corporation ("FDIC") and the other federal bank regulatory agencies issued a final rule that revised the leverage and risk-based capital requirements and the method for calculating risk-weighted assets to make them consistent with agreements that were reached by the Basel Committee on Banking Supervision and certain provisions of the Dodd-Frank Act, that were effective January 1, 2015. Among other things, the rule established a new common equity Tier 1 minimum capital requirement (4.5% of risk-weighted assets), adopted a uniform minimum leverage capital ratio at 4%, increased the minimum Tier 1 capital to risk-based assets requirement (from 4% to 6% of risk-weighted assets) and assigned a higher risk weight (150%) to exposures that are more than 90 days past due or are on non-accrual status and to certain commercial real estate facilities that finance the acquisition, development or construction of real property. The rule also required unrealized gains and losses on certain "available-for-sale" securities holdings to be included for purposes of calculating regulatory capital unless a one-time opt-out was exercised. The Company exercised the option to exclude unrealized gains and losses from the calculation of regulatory capital. Additional constraints were also imposed on the inclusion in regulatory capital of mortgage-servicing assets, deferred tax assets and minority interests. The rule limits a banking organization's capital distributions and certain discretionary bonus payments if the banking organization does not hold a "capital conservation buffer" of 2.5% in addition to the amount necessary to meet its minimum risk-based capital requirements.
As of September 30, 2025, the Bank and the Company exceeded all current minimum regulatory capital requirements as follows:
| September 30, 2025 | ||||||||||||||||||||||||||||||||||||||
| Required | Required with Capital Conservation Buffer | Actual | ||||||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||
|
Bank:(1) (2)
|
||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage capital | $ | 955,772 | 4.00 | % | 955,772 | 4.00 | % | 2,453,320 | 10.27 | % | ||||||||||||||||||||||||||||
| Common equity Tier 1 risk-based capital | 927,416 | 4.50 | 1,442,647 | 7.00 | 2,453,320 | 11.90 | ||||||||||||||||||||||||||||||||
| Tier 1 risk-based capital | 1,236,555 | 6.00 | 1,751,786 | 8.50 | 2,453,320 | 11.90 | ||||||||||||||||||||||||||||||||
| Total risk-based capital | 1,648,740 | 8.00 | 2,163,971 | 10.50 | 2,650,315 | 12.86 | ||||||||||||||||||||||||||||||||
| Company: | ||||||||||||||||||||||||||||||||||||||
| Tier 1 leverage capital | $ | 955,772 | 4.00 | % | 955,772 | 4.00 | % | 2,114,167 | 8.85 | % | ||||||||||||||||||||||||||||
| Common equity Tier 1 risk-based capital | 927,157 | 4.50 | 1,442,244 | 7.00 | 2,114,167 | 10.26 | ||||||||||||||||||||||||||||||||
| Tier 1 risk-based capital | 1,236,209 | 6.00 | 1,751,296 | 8.50 | 2,114,167 | 10.26 | ||||||||||||||||||||||||||||||||
| Total risk-based capital | 1,648,279 | 8.00 | 2,163,366 | 10.50 | 2,311,162 | 11.22 | ||||||||||||||||||||||||||||||||
(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%.
(2) For a period of three years following completion of the merger, the Bank will be required to maintain a Tier 1 capital to total assets leverage ratio of at least 8.5% and a total capital to risk-based assets ratio of at least 11.25%.
COMPARISON OF OPERATING RESULTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
General.The Company reported net income of $71.7 million, or $0.55 per basic and diluted share for the three months ended September 30, 2025, compared to $72.0 million, or $0.55 per basic and diluted share, for the three months ended June 30, 2025 and net income of $46.4 million, or $0.36 per basic and diluted share, for the three months ended September 30, 2024. For the nine months ended September 30, 2025, net income totaled $207.7 million, or $1.59 per basic and diluted share, compared to $67.0 million, or $0.65 per basic and diluted share, for the nine months ended September 30, 2024.
While there were no transaction costs related to our merger with Lakeland Bancorp, Inc. ("Lakeland") during 2025, for the three and nine months ended September 30, 2024, these costs totaled $15.6 million and $96.8 million, respectively, including an initial Current Expected Credit Loss ("CECL") provision for credit losses of $60.1 million recorded as part of the Lakeland merger.
The following tables sets forth certain information for the three and nine months ended September 30, 2025. For the periods indicated, the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the
interest expense on average interest-bearing liabilities is expressed both in dollars and rates. No tax equivalent adjustments were made. Average balances are daily averages.
| For the three months ended | |||||||||||||||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest |
Average Yield/Cost |
Average Balance | Interest |
Average Yield/Cost |
||||||||||||||||||||||||||||||
| (Dollars in Thousands) (Unaudited) | |||||||||||||||||||||||||||||||||||
| Interest Earning Assets: | |||||||||||||||||||||||||||||||||||
| Deposits | $ | 79,471 | $ | 764 | 3.82 | % | 179,313 | 2,425 | 5.38 | % | |||||||||||||||||||||||||
| Available for sale debt securities | 3,070,080 | 30,952 | 4.03 | 2,644,262 | 24,608 | 3.71 | |||||||||||||||||||||||||||||
|
Held to maturity debt securities, net (1)
|
299,506 | 1,897 | 2.53 | 342,217 | 2,136 | 2.50 | |||||||||||||||||||||||||||||
| Equity securities, at fair value | 19,457 | 120 | 2.47 | 19,654 | 276 | 5.62 | |||||||||||||||||||||||||||||
| Federal Home Loan Bank stock | 116,788 | 2,506 | 8.58 | 91,841 | 1,090 | 4.75 | |||||||||||||||||||||||||||||
|
Net loans: (2)
|
|||||||||||||||||||||||||||||||||||
| Total mortgage loans | 13,390,032 | 197,252 | 5.85 | 13,363,265 | 197,857 | 5.83 | |||||||||||||||||||||||||||||
| Total commercial loans | 4,908,131 | 81,943 | 6.63 | 4,546,088 | 81,183 | 7.05 | |||||||||||||||||||||||||||||
| Total consumer loans | 608,600 | 10,847 | 7.07 | 622,586 | 12,947 | 8.27 | |||||||||||||||||||||||||||||
| Total net loans | 18,906,763 | 290,042 | 6.09 | 18,531,939 | 291,987 | 6.21 | |||||||||||||||||||||||||||||
| Total interest earning assets | $ | 22,492,065 | $ | 326,281 | 5.76 | % | 21,809,226 | 322,522 | 5.84 | % | |||||||||||||||||||||||||
| Non-Interest Earning Assets: | |||||||||||||||||||||||||||||||||||
| Cash and due from banks | 154,859 | 341,505 | |||||||||||||||||||||||||||||||||
| Other assets | 1,871,366 | 2,097,307 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 24,518,290 | 24,248,038 | ||||||||||||||||||||||||||||||||
| Interest Bearing Liabilities: | |||||||||||||||||||||||||||||||||||
| Demand deposits | $ | 10,280,314 | $ | 70,584 | 2.72 | % | 9,942,053 | 74,864 | 3.00 | % | |||||||||||||||||||||||||
| Savings deposits | 1,596,072 | 896 | 0.22 | 1,711,502 | 1,006 | 0.23 | |||||||||||||||||||||||||||||
| Time deposits | 3,287,241 | 30,614 | 3.69 | 3,112,598 | 34,139 | 4.36 | |||||||||||||||||||||||||||||
| Total deposits | 15,163,627 | 102,094 | 2.67 | 14,766,153 | 110,009 | 2.96 | |||||||||||||||||||||||||||||
| Borrowed funds | 2,136,111 | 21,307 | 3.96 | 2,125,149 | 19,923 | 3.73 | |||||||||||||||||||||||||||||
| Subordinated debentures | 404,548 | 8,548 | 8.38 | 413,267 | 8,889 | 8.56 | |||||||||||||||||||||||||||||
| Total interest bearing liabilities | $ | 17,704,286 | 131,949 | 2.96 | % | 17,304,569 | 138,821 | 3.19 | % | ||||||||||||||||||||||||||
| Non-Interest Bearing Liabilities: | |||||||||||||||||||||||||||||||||||
| Non-interest bearing deposits | $ | 3,725,645 | 3,741,160 | ||||||||||||||||||||||||||||||||
| Other non-interest bearing liabilities | 349,945 | 541,839 | |||||||||||||||||||||||||||||||||
| Total non-interest bearing liabilities | 4,075,590 | 4,282,999 | |||||||||||||||||||||||||||||||||
| Total liabilities | 21,779,876 | 21,587,568 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 2,738,414 | 2,660,470 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 24,518,290 | 24,248,038 | ||||||||||||||||||||||||||||||||
| Net interest income | $ | 194,332 | 183,701 | ||||||||||||||||||||||||||||||||
| Net interest rate spread | 2.80 | % | 2.65 | % | |||||||||||||||||||||||||||||||
| Net interest-earning assets | $ | 4,787,779 | 4,504,657 | ||||||||||||||||||||||||||||||||
|
Net interest margin (3)
|
3.43 | % | 3.31 | % | |||||||||||||||||||||||||||||||
| Ratio of interest-earning assets to total interest-bearing liabilities | 1.27x | 1.26x | |||||||||||||||||||||||||||||||||
| (1) | Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses. | ||||
| (2) | Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans. | ||||
| (3) | Annualized net interest income divided by average interest-earning assets. | ||||
| For the nine months ended | |||||||||||||||||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest |
Average Yield/Cost |
Average Balance | Interest |
Average Yield/Cost |
||||||||||||||||||||||||||||||
| (Dollars in Thousands) (Unaudited) | |||||||||||||||||||||||||||||||||||
| Interest Earning Assets: | |||||||||||||||||||||||||||||||||||
| Deposits | $ | 78,434 | $ | 2,227 | 4.21 | % | 39,280 | 5,466 | 5.38 | % | |||||||||||||||||||||||||
| Available for sale debt securities | 2,952,923 | 87,530 | 3.95 | 2,189,671 | 52,277 | 3.18 | |||||||||||||||||||||||||||||
|
Held to maturity debt securities, net (1)
|
311,507 | 5,859 | 2.51 | 350,529 | 6,761 | 2.57 | |||||||||||||||||||||||||||||
| Equity securities, at fair value | 19,294 | 469 | 3.24 | 10,050 | 276 | 3.67 | |||||||||||||||||||||||||||||
| Federal Home Loan Bank stock | 119,503 | 6,667 | 7.48 | 84,845 | 6,145 | 9.66 | |||||||||||||||||||||||||||||
|
Net loans: (2)
|
|||||||||||||||||||||||||||||||||||
| Total mortgage loans | 13,362,561 | 577,097 | 5.77 | 10,682,974 | 461,632 | 5.70 | |||||||||||||||||||||||||||||
| Total commercial loans | 4,803,599 | 236,616 | 6.59 | 3,487,600 | 175,815 | 6.69 | |||||||||||||||||||||||||||||
| Total consumer loans | 609,979 | 31,470 | 6.90 | 460,497 | 25,820 | 7.49 | |||||||||||||||||||||||||||||
| Total net loans | 18,776,139 | 845,183 | 6.02 | 14,631,071 | 663,267 | 5.99 | |||||||||||||||||||||||||||||
| Total interest earning assets | $ | 22,257,800 | 947,935 | 5.69 | % | 17,305,446 | 734,192 | 5.61 | % | ||||||||||||||||||||||||||
| Non-Interest Earning Assets: | |||||||||||||||||||||||||||||||||||
| Cash and due from banks | 146,568 | 229,336 | |||||||||||||||||||||||||||||||||
| Other assets | 1,908,122 | 1,663,331 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 24,312,490 | 19,198,113 | ||||||||||||||||||||||||||||||||
| Interest Bearing Liabilities: | |||||||||||||||||||||||||||||||||||
| Demand deposits | $ | 10,084,036 | $ | 200,819 | 2.66 | % | 7,931,251 | 174,609 | 2.94 | % | |||||||||||||||||||||||||
| Savings deposits | 1,641,821 | 2720 | 0.22 | 1,444,135 | 2,476 | 0.23 | |||||||||||||||||||||||||||||
| Time deposits | 3,228,399 | 92,232 | 3.82 | 2,091,806 | 66,517 | 4.25 | |||||||||||||||||||||||||||||
| Total deposits | 14,954,256 | 295,771 | 2.64 | 11,467,192 | 243,602 | 2.84 | |||||||||||||||||||||||||||||
| Borrowed funds | 2,182,319 | 63,555 | 3.89 | 2,074,958 | 57,871 | 3.73 | |||||||||||||||||||||||||||||
| Subordinated debentures | 403,299 | 25,455 | 8.44 | 215,745 | 13,842 | 8.57 | |||||||||||||||||||||||||||||
| Total interest bearing liabilities | $ | 17,539,874 | 384,781 | 2.93 | % | 13,757,895 | 315,315 | 3.06 | % | ||||||||||||||||||||||||||
| Non-Interest Bearing Liabilities: | |||||||||||||||||||||||||||||||||||
| Non-interest bearing deposits | $ | 3,715,008 | 2,896,453 | ||||||||||||||||||||||||||||||||
| Other non-interest bearing liabilities | 370,224 | 379,909 | |||||||||||||||||||||||||||||||||
| Total non-interest bearing liabilities | 4,085,232 | 3,276,362 | |||||||||||||||||||||||||||||||||
| Total liabilities | 21,625,106 | 17,034,257 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 2,687,384 | 2,163,856 | |||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 24,312,490 | 19,198,113 | ||||||||||||||||||||||||||||||||
| Net interest income | $ | 563,154 | 418,877 | ||||||||||||||||||||||||||||||||
| Net interest rate spread | 2.76 | % | 2.55 | % | |||||||||||||||||||||||||||||||
| Net interest-earning assets | $ | 4,717,926 | 3,547,551 | ||||||||||||||||||||||||||||||||
|
Net interest margin (3)
|
3.38 | % | 3.18 | % | |||||||||||||||||||||||||||||||
| Ratio of interest-earning assets to total interest-bearing liabilities | 1.27x | 1.26x | |||||||||||||||||||||||||||||||||
| (1) | Average outstanding balance amounts shown are amortized cost, net of allowance for credit losses. | ||||
| (2) | Average outstanding balances are net of the allowance for loan losses, deferred loan fees and expenses, loan premiums and discounts and include non-accrual loans. | ||||
| (3) | Annualized net interest income divided by average interest-earning assets. | ||||
Net Interest Income. Net interest income increased $10.6 million to $194.3 million for the three months ended September 30, 2025, from $183.7 million for same period in 2024. Net interest income increased $144.3 million to $563.2 million for the nine months ended September 30, 2025, from $418.9 million for same period in 2024. The increase in net interest income was primarily due to favorable repricing of deposits, combined with originations of loans at favorable market rates, partially offset by an increase in borrowings. The increase in net interest income for the nine months ended September 30, 2025 was largely driven by growth in average earning assets and net assets added in the May 16, 2024 acquisition of Lakeland and related accretion of purchase accounting adjustments.
The net interest margin increased 12 basis points to 3.43% for the quarter ended September 30, 2025, compared to 3.31% for the quarter ended September 30, 2024. The weighted average yield on interest-earning assets decreased eight basis points to 5.76% for the quarter ended September 30, 2025, compared to 5.84% for the quarter ended September 30, 2024, while the weighted average cost of interest-bearing liabilities decreased 23 basis points for the quarter ended September 30, 2025, to 2.96%, compared to 3.19% for the quarter ended September 30, 2024. The average cost of interest-bearing deposits for the quarter ended September 30, 2025, was 2.67%, compared to 2.96% for the same period last year. Average non-interest-bearing demand deposits totaled $3.73 billion for the quarter ended September 30, 2025, compared to $3.74 billion for the quarter ended September 30, 2024. The average cost of total deposits, including non-interest-bearing deposits, was 2.14% for the quarter ended September 30, 2025, compared with 2.36% for the quarter ended September 30, 2024. The average cost of borrowed funds for the quarter ended September 30, 2025, was 3.96%, compared to 3.73% for the same period last year.
For the nine months ended September 30, 2025, the net interest margin increased 20 basis points to 3.38%, compared to 3.18% for the nine months ended September 30, 2024. The weighted average yield on interest-earning assets increased eight basis points to 5.69% for the nine months ended September 30, 2025, compared to 5.61% for the nine months ended September 30, 2024, while the weighted average cost of interest-bearing liabilities decreased 13 basis points to 2.93% for the nine months ended September 30, 2025, compared to 3.06% for the same period last year. The average cost of interest-bearing deposits decreased 20 basis points to 2.64% for the nine months ended September 30, 2025, compared to 2.84% for the same period last year. Average non-interest-bearing demand deposits totaled $3.72 billion for the nine months ended September 30, 2025, compared with $2.90 billion for the nine months ended September 30, 2024. The average cost of total deposits, including non-interest-bearing deposits, was 2.12% for the nine months ended September 30, 2025, compared with 2.27% for the nine months ended September 30, 2024. The average cost of borrowings for the nine months ended September 30, 2025, was 3.89%, compared to 3.73% for the same period last year.
Interest income on loans secured by real estate decreased $605,000 to $197.3 million for the three months ended September 30, 2025, from $197.9 million for the three months ended September 30, 2024. Commercial loan interest income increased $760,000 to $81.9 million for the three months ended September 30, 2025, from $81.2 million for the three months ended September 30, 2024. Consumer loan interest income decreased $2.1 million to $10.8 million for the three months ended September 30, 2025, from $12.9 million for the three months ended September 30, 2024. For the three months ended September 30, 2025, the average balance of total loans increased $374.8 million to $18.91 billion, compared to the same period in 2024. The average yield on total loans for the three months ended September 30, 2025, decreased 12 basis points to 6.09%, from 6.21% for the same period in 2024.
Interest income on loans secured by real estate increased $115.5 million to $577.1 million for the nine months ended September 30, 2025, from $461.6 million for the nine months ended September 30, 2024. Commercial loan interest income increased $60.8 million to $236.6 million for the nine months ended September 30, 2025, from $175.8 million for the nine months ended September 30, 2024. Consumer loan interest income increased $5.7 million to $31.5 million for the nine months ended September 30, 2025, from $25.8 million for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, the average balance of total loans increased $4.15 billion to $18.78 billion, compared with $14.63 billion for the same period in 2024. The average yield on total loans for the nine months ended September 30, 2025, increased three basis points to 6.02%, from 5.99% for the same period in 2024.
Interest income on held to maturity debt securities totaled $1.9 million for the three months ended September 30, 2025, compared to $2.1 million for the same period last year. Average held to maturity debt securities decreased $42.7 million to $299.5 million for the three months ended September 30, 2025, from $342.2 million for the same period last year. Interest income on held to maturity debt securities decreased $902,000 to $5.9 million for the nine months ended September 30, 2025, compared to the same period in 2024. Average held to maturity debt securities decreased $39.0 million to $311.5 million for the nine months ended September 30, 2025, from $350.5 million for the same period last year.
Interest income on available for sale debt securities increased $6.1 million to $31.0 million for the three months ended September 30, 2025, from $24.9 million for the three months ended September 30, 2024. The average balance of available for sale debt securities increased $425.8 million to $3.07 billion for the three months ended September 30, 2025, compared to the
same period in 2024. Interest income on available for sale debt securities increased $35.3 million to $87.5 million for the nine months ended September 30, 2025, from $52.3 million for the same period last year. The average balance of available for sale debt securities increased $763.3 million to $2.95 billion for the nine months ended September 30, 2025.
Dividend income on FHLBNY stock increased $1.4 million to $2.5 million for the three months ended September 30, 2025, from $1.1 million for the three months ended September 30, 2024. The average balance of FHLBNY stock increased $24.9 million to $116.8 million for the three months ended September 30, 2025, compared to the same period in 2024. Dividend income on FHLBNY stock increased $36.0 million to $94.7 million for the nine months ended September 30, 2025, from $58.7 million for the same period last year. The average balance of FHLBNY stock increased $34.7 million to $119.5 million for the nine months ended September 30, 2025.
The average yield on total securities increased to 3.89% for the three months ended September 30, 2025, compared with 3.58% for the same period in 2024. For the nine months ended September 30, 2025, the average yield on total securities increased to 3.81%, compared with 3.10% for the same period in 2024.
Interest expense on deposit accounts decreased $7.9 million to $102.1 million for the three months ended September 30, 2025, compared with $110.0 million for the three months ended September 30, 2024. For the nine months ended September 30, 2025, interest expense on deposit accounts increased $52.2 million to $295.8 million, from $243.6 million for the same period last year. The average cost of interest-bearing deposits improved to 2.67% and 2.64% for the three and nine months ended September 30, 2025, respectively, from 2.96% and 2.84% for the three and nine months ended September 30, 2024, respectively. The average balance of interest-bearing core deposits, which consist of total savings and demand deposits, for the three months ended September 30, 2025, increased $222.8 million to $11.88 billion. For the nine months ended September 30, 2025, average interest-bearing core deposits increased $2.35 billion, to $11.73 billion, from $9.38 billion for the same period in 2024. Average time deposit account balances increased $174.6 million to $3.29 billion for the three months ended September 30, 2025, from $3.11 billion for the three months ended September 30, 2024. For the nine months ended September 30, 2025, average time deposit account balances increased $1.14 billion to $3.23 billion, from $2.09 billion for the same period in 2024.
Interest expense on borrowed funds increased $1.4 million to $21.3 million for the three months ended September 30, 2025, from $19.9 million for the three months ended September 30, 2024. For the nine months ended September 30, 2025, interest expense on borrowed funds increased $5.7 million to $63.6 million, from $57.9 million for the nine months ended September 30, 2024. The average cost of borrowings increased to 3.96% for the three months ended September 30, 2025, from 3.73% for the three months ended September 30, 2024. The average cost of borrowings increased to 3.89% for the nine months ended September 30, 2025, from 3.73% for the same period last year. Average borrowings increased $11.0 million to $2.14 billion for the three months ended September 30, 2025, from $2.13 billion for the three months ended September 30, 2024. For the nine months ended September 30, 2025, average borrowings increased $107.4 million to $2.18 billion, compared to $2.07 billion for the nine months ended September 30, 2024.
Provision for Credit Losses.Provisions for credit losses are charged to operations in order to maintain the allowance for credit losses at a level management considers necessary to absorb projected credit losses that may arise over the expected term of each loan in the portfolio. In determining the level of the allowance for credit losses, management estimates the allowance balance using relevant available information from internal and external sources relating to past events, current conditions and reasonable and supportable economic forecasts. The amount of the allowance is based on estimates, and the ultimate losses may vary from such estimates as more information becomes available or later events change. Management assesses the adequacy of the allowance for credit losses on a quarterly basis and makes provisions for credit losses as necessary.
The Company recorded provisions for credit losses on loans of $4.5 million and $2.2 million for the three and nine months ended September 30, 2025, respectively, compared with provisions of $9.6 million and $75.9 million for the three and nine months ended September 30, 2024, respectively. The provision for credit losses on loans for the three and nine months ended September 30, 2025 was primarily attributable to overall growth in the loan portfolio, combined with a weakened economic forecast compared to the prior periods. The provision for credit losses on loans for the nine months ended September 30, 2024 was primarily attributable to an initial CECL provision for credit losses of $60.1 million, recorded as part of the Lakeland merger.
Non-Interest Income.Non-interest income totaled $27.4 million for the quarter ended September 30, 2025, an increase of $564,000, compared to the same period in 2024. Fee income increased $1.5 million to $11.3 million for the three months ended September 30, 2025, compared to the prior year quarter, primarily due to increases in loan prepayment fee income and deposit fee income. Additionally, other income increased $675,000 to $2.2 million for the three months ended September 30, 2025, compared to the quarter ended September 30, 2024, primarily due to increases in gains on the sale of SBA loans, combined with a recovery of a prior-year charge-off. Within other non-interest income, gains on the sale of SBA loans totaled $512,000 for the
three months ended September 30, 2025. Insurance agency income increased $221,000 to $3.9 million for the three months ended September 30, 2025, compared to the quarter ended September 30, 2024, largely due to an increase in business activity. Partially offsetting these increases to non-interest income, BOLI income decreased $1.6 million to $2.7 million for the three months ended September 30, 2025, compared to the prior year quarter, primarily due to a decrease in benefit claims recognized, while wealth management fees decreased $271,000 to $7.3 million for the three months ended September 30, 2025, compared to the quarter ended September 30, 2024, mainly due to a decrease in the average market value of assets under management during the period.
For the nine months ended September 30, 2025, non-interest income totaled $81.5 million, an increase of $11.6 million compared to the same period in 2024. Fee income increased $7.3 million to $31.7 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to increases in deposit fee income, loan prepayment fee income and debit and credit card related fee income. Net gains on securities transactions increased $3.1 million for the nine months ended September 30, 2025, primarily due to a prior year $2.8 million loss on the sale of subordinated debt issued by Lakeland from the Provident investment portfolio prior to the merger. Other income increased $3.0 million to $6.2 million for the nine months ended September 30, 2025, compared to $3.2 million for the same period in 2024, primarily due to an increase in gains on sales of SBA and mortgage loans, an increase in profit on fixed asset sales and a recovery of a prior-year charge-off. Within other non-interest income, gains on the sale of SBA loans totaled $1.8 million for the nine months ended September 30, 2025. Additionally, insurance agency income increased $1.5 million to $14.4 million for the nine months ended September 30, 2025, compared to $12.9 million for the same period in 2024, largely due to increases in contingent commissions, retention revenue and new business activity. Partially offsetting these increases in non-interest income, BOLI income decreased $2.1 million to $7.3 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to a decrease in benefit claims recognized, combined with lower equity valuations, while wealth management income decreased $1.3 million to $21.6 million for the nine months ended September 30, 2025, compared to the same period in 2024, mainly due to a decrease in the average market value of assets under management during the period.
Non-Interest Expense. For the three months ended September 30, 2025, non-interest expense totaled $113.1 million, a decrease of $22.9 million, compared to the three months ended September 30, 2024. Merger-related expenses decreased $15.6 million for the three months ended September 30, 2025, compared to the same period in 2024. Amortization of intangibles decreased $2.7 million to $9.5 million for the three months ended September 30, 2025, compared to $12.2 million for the same period in 2024, largely due to a decrease in the core deposit intangible amortization related to the Lakeland merger in the current year. Additionally, other operating expenses decreased $2.3 million to $13.5 million for the three months ended September 30, 2025, compared to $15.8 million for the same period in 2024, primarily due to a prior year write-down on a foreclosed property, combined with decreases in legal and professional service expenses. Data processing expenses decreased $1.4 million to $9.1 million for three months ended September 30, 2025, compared to $10.5 million for the same period in 2024, primarily due to core processing system expenses in the prior year related to the addition of Lakeland.
Non-interest expense totaled $344.0 million for the nine months ended September 30, 2025, an increase of $20.7 million, compared to $323.2 million for the nine months ended September 30, 2024. Compensation and benefits expense increased $30.4 million to $188.8 million for the nine months ended September 30, 2025, compared to $158.4 million for the nine months ended September 30, 2024, primarily attributable to the addition of Lakeland personnel. Amortization of intangibles increased $9.1 million to $28.5 million for the nine months ended September 30, 2025, compared to $19.4 million for the nine months ended September 30, 2024, largely due to core deposit intangible amortization related to Lakeland. Net occupancy expense increased $7.3 million to $39.7 million for the nine months ended September 30, 2025, compared to the same period in 2024, primarily due to increases in depreciation and maintenance expense related to the addition of Lakeland. Other operating expenses increased $7.0 million to $44.4 million for the three months ended September 30, 2025, compared to $37.4 million for the same period in 2024, primarily due to a $2.7 million write-down on a foreclosed property, combined with additional expenses due to the addition of Lakeland. Data processing expense increased $2.6 million to $28.3 million for the nine months ended September 30, 2025, compared to $25.7 million for the nine months ended September 30, 2024, primarily due to the addition of Lakeland, while FDIC insurance increased $591,000 to $10.1 million for the nine months ended September 30, 2025, primarily due to the addition of Lakeland. Partially offsetting these increases to non-interest expense, merger-related expenses decreased $36.7 million for the nine months ended September 30, 2025.
Income Tax Expense. For the three months ended September 30, 2025, the Company's income tax expense was $29.9 million with an effective tax rate of 29.4%, compared with $18.9 million with an effective tax rate of 28.9% for the three months ended September 30, 2024. The increase in tax expense and the effective tax rate for the three months ended September 30, 2025, compared with the same period last year was largely due to an increase in pre-taxable income in the quarter.
For the nine months ended September 30, 2025, the Company's income tax expense was $88.2 million with an effective tax rate of 29.8%, compared with income tax expense of $19.9 million for the nine months ended September 30, 2024. The increase in tax expense for the nine months ended September 30, 2025 compared with the same period last year was largely due to an increase in taxable income, combined with a prior year $5.3 million tax benefit related to the revaluation of deferred tax assets to reflect the imposition by the State of New Jersey of a 2.5% Corporate Transit Fee, effective January 1, 2024. Additionally, prior year pre-taxable income was negatively impacted by the initial CECL provision for credit losses on loans of $60.1 million recorded in accordance with GAAP requirements for accounting for business combinations from the Lakeland merger.
Provident Financial Services Inc. published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 18:22 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]