Good morning. And welcome to the Provident Financial Services First Quarter Earnings Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded.I would now like to turn the conference over to Mr. Leonard Gleason, SVP and IRO of Provident Financial Services. Please go ahead.

Thank you, Sabrina. Good morning, ladies and gentlemen. Thank you for joining us on our first quarter earnings call. Today's presenters are Chris Martin, Chairman, President and CEO; and Tom Lyons, Senior Executive Vice President and Chief Financial Officer.Before beginning their review of our financial results, we ask that you please take note of our standard caution as to any forward-looking statements that may be made during the course of today's call. Our full disclaimer is contained in this morning's earnings release, which has been posted to the Investor Relations page on our website provident.bank.Now it's my pleasure to introduce Chris Martin, who will offer his perspective on our first quarter. Chris?

Thank you, Len, and good morning. And we hope that you and your families are well and coping with this most unusual environment. First, I would like to applaud our employees who continue to provide exceptional service to our customers under difficult conditions. We have continued to deliver on our brand promise, commitment to the customer, while conducting our business in a safe and sound manner. I'm extremely proud of the way our team members from various disciplines have met the challenge from the onslaught of requests for Paycheck Protection Program loans.We have directly secured 820 PPP loans for a total of $378 million, and also ordered customers the opportunity to apply to a FinTech option. Now this was a great team effort. Like most companies in our industry, our first quarter financial results were adversely impacted by the shutdown of our economy due to the pandemic, and our adoption, as of January 1 of CECL. We reported earnings of $0.23 per share with a core pre-tax, pre-provision return on average assets of 1.47% for the quarter, excluding $463,000 in merger related professional fees.We announced our planned merger of SB One Bancorp in March, and have already filed our applications with the bank regulatory agencies. The integration teams from both banks have been meeting virtually and planning for an anticipated third quarter closure.Total assets at March 31st, 2020 increased to $10.1 billion, as we finally crossed the $10 billion in asset threshold. Our outstanding loan balances at March 31st were $7.37 billion, with loan originations of $355 million for the quarter. We believe our loan portfolio stalled but there are some commercial customers and industries that had been hit hard by COVID-19.We are keeping a close eye on loan customers in the retail, hotel and restaurant industries where our combined…

Thank you, Chris and good morning everyone. As Chris noted, our reported net income was $14.9 million or $0.23 per diluted share compared to $30.9 million or $0.48 per diluted share for the first quarter of 2019, and $26 million or $0.40 per diluted share in the trailing quarter.Earnings for the current quarter were adversely impacted by elevated provisions for credit losses under the CECL standard and the recessionary economic forecast attributable to the COVID-19 pandemic. Pre-tax, pre-provision earnings were $36.4 million excluding $15.7 million in provisions for credit losses on loans and commitments to extend credit and $463,000 of professional fees related to the pending SB One merger. This compares to $39.6 million in the trailing quarter, excluding expense recorded to increase the contingent liability related to the Tirschwell & Loewy acquisition, and $38.8 million for the first quarter of 2019.Our net interest margin contracted 1 basis point versus the trailing quarter and 20 basis points versus the same period last year, as declining market interest rates drove reductions in asset yields. To combat margin compression, we continue to reprice deposit accounts with negotiated exception rates and maturing time deposits. This deposit rate management, coupled with a continued emphasis on attracting non-interest bearing deposits resulted in a 3 basis point decrease in the total cost of deposits this quarter to 62 basis points.Non-interest-bearing deposits averaged $1.5 billion or 21% of total average deposits for the quarter. Average borrowing levels also decreased $31 million and the average cost of borrowed funds decreased 18 basis points versus the trailing quarter. We will continue to thoughtfully manage liability costs as the rate environment evolves. Quarter-end loan totals increased $39 million or 2.1% annualized from December 31st, as growth in C&I and residential mortgage loans is partially offset by net reductions in CRE,…

We will now begin the question-and-answer session. [Operator Instructions]. The first question is from Mark Fitzgibbon of Piper Sandler. Please go ahead.

Thank you and good morning. I wondered if you could start by giving us an update on asset flows in your wealth management business and what AUM was as of 12/31 and 3/31?

Sure. Mark, it's Tom. The ending balance in AUM at 12/31 was $2.4 billion. At March 31st that had declined to $2.8 billion. We're not seeing much in the way of client losses, those are really market conditions driving that. In terms of average balances for the two quarters, which is what drives the fee income was about $3.3 billion in Q4, down to $3.2 billion in Q1. So, we really saw the decrease in market value toward the end of the period. So, if I think about it in terms of income at risk going forward if we were to remain at the March 31st levels as an average for Q2 would be about $1 million lighter in terms of income in Q2.

Okay. And then secondly, of the $890 million of loans that you granted payment deferrals on this quarter, I was wondering what did the breakdown of that look like by category?

CRE loans are about $548 million, multifamily is $37 million, construction is about $18 million, C&I is about $217 million, for total commercial type loans is $820 million, and then in the resi and consumer it's about $69 million.

Okay. And then Tom, I apologize if you mentioned this in your comments but that $1 million charge that went through expenses were off balance sheet credit exposure, could you just give us a little more detail on that.

Yes, that's the reserve on commitments to extend credit that's required under CECL. So that runs through the non-interest expense section. If it had to came to provision loan losses, that's why the total provision for credit losses is $15.7 million, but the piece that's attributable to increase in the allowance for loan losses really, is just the $14.7 million, that's the difference.

Okay. And then your pipeline looks really strong, and I think $1.3 billion. How much of that would you expect to actually close in, let's say the second quarter?

We get about a 52% pull-through rate. If you had pull through just the rate on that pipeline, it actually picks up a little bit to 3.23%, I think I quoted as 3.16% as the overall pipeline rate.

The next question comes from [Peter Kowalski] with High Street Advisors. Please go ahead.

Hi, Chris, Tom, how are you? I was a little disappointed I wasn't able to -- we weren't able to get together at the Annual Meeting but hopefully next year things will be back to normal.

We would agree. Virtual helps, but doesn't help.

Yeah, first question. Cash dividend, I see you declared one for this quarter, going forward is the Board committed to maintaining its cash dividend for shareholders like myself, who rely on dividend income to pay the bills. It's kind of [indiscernible]…

Well certainly I know our Board looks at that as just part of our return for our shareholders in this environment with limited buyback opportunities, we look at that as something that's very important to our shareholders, and it is always evaluated quarter-to-quarter, but we're in a very strong capital position and again with a review of our balance sheet, loans and the like, I would think that is stable. But obviously quarter-to-quarter, we don't still know what happens next quarter, if we get things started again the economy it should bring more stability just to the messages by itself.

And another question. Unfortunately, the timing of your SB One acquisition was unfortunate. I mean I guess maybe I guess six years ago was the last time you did the bank deal with Team Capital. Question I have, if this lockdown ends up being longer than it is expected to, and the economy gets weaker? In the merger agreement, is there a material adverse change clause that if SB's asset quality deteriorated significantly that you can reevaluate the transaction?

If you do review the document, there is a material adverse impact in that document, that's been filed. We envision this still as a very solid transaction, two strong companies getting together and two like management teams and Boards. So I wouldn't see that as an issue. On the other hand, you have to watch and see. I think they released earnings yesterday and we didn't end up seeing any asset quality changes that we would be worried about right now. To your point things go on, go forward, but I think we're still in a good place. We look forward to this combination. But all antenna up from both sides.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Christopher Martin for any closing remarks.

Thank you, Sabrina. Our financial industry will be operating in a challenging environment for a while, as we are all susceptible to economically emotional stress brought on by the pandemic. However, the strength of our capital base and balance sheet along with the dedicated efforts of our offices' employees and our underlying culture will continue to be a differentiating factor over time. We thank you all for your continued confidence and support and look forward to better and brighter days ahead. Stay well and thank you very much.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.