What changed in this filing

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Item 1A. Risk Factors

2023-02-24 compared with 2022-02-28 · 131 added, 121 removed, 241 unchanged (51% of the section changed)

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In that case, the trading price of the Company’s common stock may decline and stockholders may lose part or all of their investment in the Company’s common stock or Series A Preferred Stock.

Risks Related to the COVID-19 Pandemic

The ongoing COVID-19 pandemic and measures intended to prevent its spread could continue to adversely affect the Company’s business activities, financial condition, and results of operations and such effects will depend on future developments, which are highly uncertain and difficult to predict.

Global health concerns relating to the COVID-19 pandemic and related government actions taken to reduce the spread of the virus have continued to affect the macroeconomic environment, both nationally and in the Company’s existing geographic footprint.

The COVID-19 pandemic has led to federal, state, and local governments enacting various restrictions in an attempt to limit the spread of the virus, and along with various federal agencies, have led to measures to address the economic and social consequences of the pandemic.

There can be no assurance that the steps taken by the U.S.

or state governments will be effective or achieve their desired results in a timely fashion.

Additionally, there can be no assurance that federal and state agencies will not pass further measures that provide accommodations that could impact the Company’s financial results.

Furthermore, the full impact of the COVID-19 pandemic on the Company’s business activities as a result of new government and regulatory policies, programs, and guidelines, as well as market reactions to such activities, remains uncertain.

The economic effects of the COVID-19 outbreak have had a destabilizing effect on financial markets, key market indices, and overall economic activity.

The uncertainty regarding the duration of the pandemic and the resulting economic disruption has caused increased market volatility and may further depress economic activity and/or consumer confidence and business generally.

The continuation of these conditions caused by the pandemic, including the impacts of federal and state measures, can be expected to adversely impact the Company’s businesses and results of operations and the operations of borrowers, customers, and business partners.

In particular, these events may (i) adversely affect customer deposits and the stability of the Company’s deposit base, or otherwise impair liquidity, (ii) impair the ability of borrowers to repay outstanding loans or other obligations, resulting in increases in delinquencies, (iii) reduce the demand for loans, wealth management revenues, or the demand for other products and services, (iv) impact the creditworthiness of potential and current borrowers, (v) negatively impact the productivity and availability of key personnel and other employees necessary to conduct business, and of third-party service providers who perform critical services, or otherwise cause operational failures due to changes in normal business

practices necessitated by or issues with employee retention caused by the pandemic and related governmental actions or otherwise, (vi) impair the ability of loan guarantors to honor commitments, (vii) impair the value of the collateral securing loans (particularly with respect to real estate), (viii) impair the value of the securities portfolio, (ix) require an increase in the allowance for credit losses, (x) negatively impact regulatory capital ratios, (xi) increase cyber and payment fraud risk, given increased online and remote activity, (xii) result in increased compliance risk as the Company becomes subject to new regulatory and other requirements, and (xiii) broadly result in lost revenue and income.

Prolonged measures by public health or other governmental authorities encouraging or requiring significant restrictions on travel, assembly, or other core business practices would further harm the Bank’s business and that of its customers, in particular small to medium-sized business customers.

Although the Company has business continuity plans and other safeguards in place, there is no assurance that they will be effective.

The ultimate impact of these factors is highly uncertain and the Company does not yet know the full extent of the impact on business, operations, or the global economy as a whole.

However, the decline in economic conditions generally and a prolonged negative impact on small to medium-sized businesses, in particular, due to the COVID-19 pandemic could result in a material adverse effect on the Company’s business, financial condition, and results of operations and may heighten many of the known risks described herein and in other filings with the SEC.

Risks Related to Lending Activities

The Bank’s emphasis on commercial lending may expose the Bank to increased lending risks .

At December 31, 2021, $5.88 billion, or 68.2%, of the Bank’s total loans consisted of commercial real estate, multi-family real estate and land loans, and commercial and industrial loans.

These portfolios have grown in recent years and the Bank intends to continue to emphasize these types of lending.

The Company’s emphasis on commercial lending may expose the Company to increased lending risks .

At December 31, 2022, $6.79 billion, or 68.5%, of the Company’s total loans consisted of commercial real estate, multi-family real estate and land loans, and commercial and industrial loans.

These portfolios have grown in recent years and the Company intends to continue to emphasize these types of lending arrangements.

These types of loans may expose a lender to greater risk of non-payment and loss than residential real estate loans because repayment of the loans often depends o n the successful operation of the property or the borrower’s business and the income stream of the borrowers.

Such loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential real estate loans.

In addition, many of these loans were acquired through the Company’s acquisitions, and were not underwritten by the Bank and were made to borrowers with whom the Company and the Bank do not have longstanding relationships.

The level of the commercial real estate loan portfolio may subject the Bank to additional regulatory scrutiny.

These loans expose the Company to greater credit risk than loans secured by residential real estate because the collateral securing these loans typically cannot be liquidated as easily as residential real estate.

If the Company forecloses on these loans, the holding period for the collateral typically is longer than for a single or multifamily residential property because there are fewer potential purchasers of the collateral.

Commercial and industrial loans are typically affected by the borrowers’ ability to repay the loans from the cash flows of their businesses.

These loans may involve greater risk because the availability of funds to repay each loan depends substantially on the success of the business itself.

The collateral securing the loans and leases often depreciates over time, is difficult to appraise and liquidate and fluctuates in value based on the success of the business.

The level of the commercial real estate loan portfolio may subject the Company to additional regulatory scrutiny.

The OCC and the other federal bank regulatory agencies have promulgated joint guidance on sound risk management practices for financial institutions with concentrations in commercial real estate lending.

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The guidance states that management should employ heightened risk management practices including board and management oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and stress testing.

While it is management’s belief that policies and procedures with respect to the Bank’s commercial real estate loan portfolio have been implemented consistent with this guidance, bank regulators could require that additional policies and procedures be implemented consistent with their interpretation of the guidance that may result in additional costs or that may result in the curtailment of commercial real estate and multi-family lending that would adversely affect the Bank’s loan originations and profitability.

The Dodd-Frank Act imposes obligations on originators of residential mortgage loans .

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If the originator cannot meet this standard, the burden is on the lender to demonstrate the appropriateness of its policies and the strength of its controls.

The Dodd-Frank Act contains an exception from this Ability-To-Repay rule for “Qualified Mortgages.” The rule sets forth specific underwriting criteria for a loan to qualify as a Qualified Mortgage.

The Dodd-Frank Act contains an exception from this Ability-To-Repay rule for “Qualified Mortgages.” Applicable rules set forth specific underwriting criteria for a loan to qualify as a Qualified Mortgage.

If a loan meets these criteria and is not a “higher priced loan” as defined in FRB regulations, the CFPB rule establishes a safe harbor preventing a consumer from asserting the failure of the originator to establish the consumer’s Ability-To-Repay.

Additionally, conforming fixed-rate loans with a debt-to-income ratio greater than 43% would also qualify as an Ability-To-Repay Qualified Mortgage based upon an automated loan approval from one of the government sponsored mortgage entities.

However, a consumer may assert the lender’s failure to comply with the Ability-To-

Repay rule for all residential mortgage loans other than Qualified Mortgages, and may challenge whether a loan actually met the criteria to be deemed an Ability-to-Pay Qualified Mortgage.

However, a consumer may assert the lender’s failure to comply with the Ability-To-Repay rule for all residential mortgage loans other than Qualified Mortgages, and may challenge whether a loan actually met the criteria to be deemed an Ability-to-Pay Qualified Mortgage.

These challenges have yet to be addressed by the courts.

Although the majority of residential mortgages historically originated by the Bank would be considered Qualified Mortgages, the Bank currently originates residential mortgage loans that do not qualify.

As a result of the Ability-to-Repay rules, the Bank may experience loan losses, litigation-related expenses, and delays in taking title to real estate collateral in a foreclosure proceeding if these loans do not perform and borrowers challenge whether the Bank satisfied the Ability-To-Repay rule upon originating the loan.

The Bank’s allowance for credit losses may be inadequate, which could hurt the Company’s earnings .

The Bank’s allowance for credit losses may prove to be inadequate to cover actual credit losses.

If the Bank is required to increase its allowance, current earnings may be reduced.

The Bank provides for losses by reserving what it believes to be an adequate amount to absorb any estimated lifetime expected credit losses.

A charge-off reduces the Bank’s reserve for possible credit losses.

If the Bank’s reserves were insufficient, it would be required to record a reserve, which would reduce earnings for that period.

Although the majority of residential mortgages historically originated by the Company would be considered Qualified Mortgages, the Company currently originates residential mortgage loans that do not qualify.

As a result of the Ability-to-Repay rules, the Company may experience loan losses, litigation-related expenses, and delays in taking title to real estate collateral in a foreclosure proceeding if these loans do not perform and borrowers challenge whether the Company satisfied the Ability-To-Repay rule upon originating the loan.

The Company’s allowance for credit losses may be inadequate, which could hurt the Company’s earnings .

The Company’s allowance for credit losses may prove to be inadequate to cover actual credit losses.

If the Company is required to increase its allowance, current earnings may be reduced.

The Company provides for losses by reserving what it believes to be an adequate amount to absorb any estimated lifetime expected credit losses.

A charge-off reduces the Company’s allowance for possible credit losses.

If the Company’s allowance was insufficient, it would be required to record a provision, which would reduce earnings for that period.

Changes to the economic forecasts within the model could positively or negatively impact the actual results.

In addition, regulatory agencies, as an integral part of their examination process, may require additions to the allowance based on their judgment about information available to them at the time of their examination.

Any increase in the allowance for credit losses, or expenses incurred to determine the appropriate level of the allowance for credit losses, may have a material adverse effect on the Company’s financial condition and results of operations.

The Company is subject to regulatory enforcement risk, reputation risk, and litigation risk regarding participation in the Paycheck Protection Program (“PPP”) and is subject to the risk that the SBA may not fund some or all PPP loan guarantees .

The CARES Act included the PPP as a loan program administered through the SBA.

Under the PPP, small businesses and other entities and individuals can apply for loans from SBA lenders and other approved regulated lenders, subject to detailed qualifications and eligibility criteria.

Because of the short timeframe between the passing of the CARES Act and implementation of the PPP, some of the rules and guidance relating to PPP were issued after lenders began processing PPP applications.

Also, the re was and continues to be uncertainty in the laws, rules and guidance relating to the PPP.

Since the opening of the PPP, several banks have been subject to litigation regarding the procedures used in processing PPP applications, and several banks have been sub ject to litigation regarding the payment of fees to agents that assisted borrowers in obtaining PPP loans.

In addition, some banks and borrowers have received negative media attention associated with PPP loans.

Although management believes the Company has administered the PPP in accordance with all applicable laws, regulations and guidance, the Company could be exposed to litigation risk and negative media attention related to its participation in the PPP.

If any such litigation is not resolved in the Company’s favor, it may result in significant financial liability or adversely affect the Company’s reputation.

In addition, litigation can be costly, regardless of outcome.

Any financial liability, litigation costs or reputational damage caused by PPP-related litigation or media attention could have a material adverse impact on the Company’s reputation, business, financial condition, and results of operations.

The PPP has also attracted interest from federal and state enforcement authorities, oversight agencies, regulators, and U.S.

Congressional committees.

State Attorneys General and other federal and state agencies may assert that they are not subject to the provisions of the CARES Act and the PPP regulations entitling the Company to rely on borrower certifications, and take more aggressive action against the Company for alleged violations of the provisions governing the PPP.

Federal and state regulators can impose or request that the Bank consents to substantial sanctions, restrictions, and requirements if they determine there are violations of laws, rules or regulations or weaknesses or failures with respect to general standards of safety and soundness, which could adversely affect the Company’s reputation, business, reputation, financial condition, and results of operations.

The Company also has credit risk on PPP loans if the SBA determines that there is a deficiency in the manner in which the Company originated, funded or serviced loans, including any issue with the eligibility of a borrower to receive a PPP loan.

In the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the Bank originated, funded or serviced a PPP loan, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty or, if the SBA has already paid under the guaranty, seek recovery of any loss related to the deficiency from the Company.

The foreclosure process m ay adversely impact the Bank’s recoveries on non-performing loans .

The judicial foreclosure process is protracted, which delays the Company’s ability to resolve non-performing loans through the sale of the underlying collateral.

The foreclosure process m ay adversely impact the Company’s recoveries on non-performing loans .

The judicial foreclosure process is protracted, especially in New Jersey, where foreclosure timelines remain among the longest in the nation, which delays the Company’s ability to resolve non-performing loans through the sale of the underlying collateral.

The longer timelines have been the result of the economic crisis, additional consumer protection initiatives related to the foreclosure process, increased documentary requirements and judicial scrutiny, and, both voluntary and mandatory programs under which lenders may consider loan modifications or other alternatives to foreclosure.

These reasons and the legal and regulatory responses have impacted the foreclosure process and completion time of foreclosures f or residential mortgage lenders.

This may result in a material adverse effect on collateral values and the Bank’s ability to minimize its losses.

This may result in a material adverse effect on collateral values and the Company’s ability to minimize its losses.

Risks Related to Economic Matters

Inflation can have an adverse impact on the Company’s business and its customers.

Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.

Over the past year, in response to a pronounced rise in inflation, the FRB has raised certain benchmark interest rates to combat inflation.

As discussed below under Risks Related to Interest Rates—Changes in interest rates could adversely affect results of operations and financial condition , as inflation increases and market interest rates rise, the value of the Company’s investment securities, particularly those with longer maturities, would decrease, although this effect can be less pronounced for floating rate instruments.

In addition, inflation generally increases the cost of goods and services the Company uses in its business operations, such as electricity and other utilities, and also generally increases employee wages, any of which can increase the Company’s non-interest expenses.

Furthermore, the Company’s customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with the Company.

Sustained higher interest rates by the FRB to tame persistent inflationary price pressures could also push down asset prices and weaken economic activity.

A deterioration in economic conditions in the United States and the Company’s markets could result in an increase in loan delinquencies and non-performing assets, decreases in loan collateral values and a decrease in demand for the Company’s products and services, all of which, in turn, would adversely affect the Company’s business, financial condition and results of operations.

A worsening of economic conditions in the market area could reduce demand for the products and services and/or result in increases in the level of non-performing loans, which could adversely affect the Company’s business, financial condition, and results of operations.

A deterioration in economic conditions, especially local conditions, as a result of COVID-19, inflation or otherwise, could have the following consequences, any of which could have a material adverse effect on the business, financial condition, liquidity and results of operations, and could more negatively affect the Company compared to a financial institution that operates with more geographic diversity:

A deterioration in economic conditions, especially local conditions, as a result of COVID-19, inflation, recession or otherwise, could have the following consequences, any of which could have a material adverse effect on the

business, financial condition, liquidity and results of operations, and could more negatively affect the Company compared to a financial institution that operates with more geographic diversity:

• demand for the products and services may decline;

• there may be an increase to the allowance for credit losses;

• loan delinquencies, problem assets, and foreclosures may increase;

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A downturn in the local economy or in local real estate values could adversely impact profits .

Most of the Bank’s loans are secured by real estate and are made to borrowers throughout New Jersey and the major metropolitan areas of Philadelphia, New York, Baltimore, Washington D.C., and Boston, as well as their surrounding areas.

A downturn in the local economy or a decline in real estate values could increase the amount of non-performing loans and cause residential and commercial real estate loans to become inadequately collateralized, which could expose the Bank to a greater risk of loss.

Most of the Bank’s loans are s ecured by real estate and are made to borrowers throughout New Jersey and the major metropolitan areas of Philadelphia, New York, Baltimore, and Boston, as well as their surrounding areas.

A return of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which the Company does its business, the value of loans, investments, and collateral securing loans and classified assets, reduce the demand for the Company’s products and services, and/or the ongoing operations, costs and profitability.

Any of these negative events could increase the amount of non-performing loans and cause residential and commercial real estate loans to become inadequately collateralized, any of which could expose the Company to a greater risk of loss and may adversely affect the Company’s capital, liquidity and financial conditions.

Risks Related to Acquisitions and Growth

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The ability to manage growth will depend on its ability to continue to attract, hire and retain skilled employees.

Success will also depend on the ability of officers and key employees to continue to implement and improve operational and other systems, to manage multiple, concurrent customer relationships and to hire, train and manage employees.

In addition, to successfully manage substantial growth, the Company may need to increase non-interest expenses through additional leasehold and data processing costs, and other infrastructure costs.

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No assurance can be given that the Company will be able to raise any required capital, or that it will be able to raise capital on terms that are beneficial to stockholders.

A significant portion of the Company’s loan portfolio has grown through acquisition, and therefore may not have been underwritten to meet the Company’s credit standards .

A portion of the Company’s loan portfolio has grown through acquisition, and therefore may not have been underwritten to meet the Company’s credit standards .

Loans that were acquired as part of the Company’s acquisitions of other depository institutions, were not underwritten or originated in accordance with the Company’s credit standards, including environmental matters, and the Company did not have long-standing relationships with many of these borrowers at the time of acquisition.

The acquired loans are re-risked at the date of acquisition based on the Company’s credit standards, which can temporarily increase loans classified as special mention and substandard for a period of time until these loans are integrated and conform to the Company’s credit standards.

The acquired loans are underwritten at the date of acquisition based on the Company’s credit standards, which can temporarily increase loans classified as special mention and substandard for a period of time until these loans are integrated and conform to the Company’s credit standards.

Although the Company reviewed the loan portfolios of each institution acquired as part of the diligence process, and believes that it has established reasonable credit marks with regard to all loans acquired, no assurance can be given that the Company will not incur losses in excess of the credit marks with regard to these acquired loans, or that any such losses, if they occur, will not have a material adverse effect on the Company’s business, financial condition, and results of operations.

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Acquiring other banks, businesses, or branches may have an adverse effect on financial results and may involve various other risks commonly associated with acquisitions, including those discussed above, as well as, among other things:

• payment of a premium over book and market values that may dilute the tangible book value and earnings per share in the short and long-term;

• payment of a premium over book and market values that may dilute the book value and earnings per share in the short and long-term;

• potential exposure to unknown or contingent liabilities of the target company;

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Risks Related to Interest Rates

A continuation of the historically low interest rate environment and the possibility that the Company may access higher-cost funds to support loan growth and operations may adversely affect net interest income and profitability .

In recent years, the Federal Reserve Board’s policy has been to maintain interest rates at historically low levels through its targeted federal funds rate and the purchase of mortgage-backed, U.S government and agency securities.

The Company’s ability to reduce interest expense may be limited at current interest rate levels while the average yield on interest-earning assets may continue to decrease, and interest expense may increase as it may be necessary to access non-core funding sources or increase deposit rates to fund operations.

A continuation of a low interest rate environment or an increase in cost of funds may adversely affect net interest income, which would have an adverse effect on profitability.

The reversal of the historically low interest rate environment may adversely affect net interest income and profitability.

The FRB decreased benchmark interest rates significantly, to near zero, in response to the COVID-19 pandemic.

The FRB has reversed its policy of near zero interest rates given its concerns over inflation.

Market interest rates have risen in response to the FRB’s recent rate increases.

As discussed below, the increase in market interest rates could have an adverse effect on the Company’s net interest income and profitability.

Changes in interest rates could adversely affect results of operations and financial condition .

The Bank’s ability to make a profit largely depends on net interest income, which could be negatively affected by changes in interest rates.

Interest-bearing liabilities generally have shorter contractual maturities than interest-earning assets.

The Company’s ability to make a profit largely depends on net interest income, which could be negatively affected by changes in interest rates.

Further, interest-bearing liabilities generally have shorter contractual maturities than interest-earning assets and are subject to repricing based on economic conditions, competition, and funding availability among other factors.

This imbalance can create significant earnings volatility as market interest rates change over time.

In a period of rising interest rates, the interest income earned on interest-earning assets may not increase as rapidly as the interest paid on interest-bearing liabilities.

In a period of rising interest rates, the interest income earned on interest-earning assets may not increase as rapidly as the interest paid on interest-bearing liabilities, which would be expected to compress the interest rate spread and have a negative effect on the Company’s profitability.

Additionally, a flat or an inverted yield curve, where short-term rates are close to, or above, long-term rates, could adversely affect the Company’s financial condition and results of operations.

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A reduction in interest rates causes increased prepayments of loans and mortgage-backed securities as borrowers refinance their debt to reduce their borrowing costs.

This creates reinvestment risk, which is the risk that the Bank may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates earned on the prepaid loans or securities.

This creates reinvestment risk, which is the risk that the Company may not be able to reinvest the funds from faster prepayments at rates that are comparable to the rates earned on the prepaid loans or securities.

Conversely, an increase in interest rates generally reduces prepayments.

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Stockholders’ equity is increased or decreased by the amount of the change in the unrealized gain or loss (difference between the estimated fair value and the amortized cost) of the available-for-sale debt securities portfolio, net of the related tax expense or benefit, under the category of accumulated other comprehensive income (loss).

Therefore, a decline in the estimated fair value of this portfolio will result in a decline in reported stockholders’ equity, as well as book value per common share.

The decrease will occur even though the securities are not sold.

During the year ended December 31, 2022, the Company incurred other comprehensive losses of $33.4 million, net of tax, related to net changes in unrealized holding losses in the available-for-sale investment securities portfolio, which negatively impacted stockholders’ equity, as well as book value per common share.

The decrease occurred even though the securities are not sold.

The Company conducts a periodic review of the debt securities portfolio to determine if any decline in the estimated fair value of any security below its cost basis is considered impaired.

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Risks Related to Loan Sales

The Bank may be required to repurchase mortgage loans for a breach of representations and warranties, which could harm the Company’s earnings .

The Company may be required to repurchase mortgage loans for a breach of representations and warranties, which could harm the Company’s earnings .

The Compa ny enters into loan sale agreements with investors in the normal course of business.

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These changes also may require the Company to invest significant management attention and resources to make any necessary changes to operations in order to comply, and could therefore also materially and adversely affect the Company’s business, financial condition, and results of operations.

The Dodd-Frank Act directed the FRB to issue rules to limit debit-card interchange fees, (the fees that issuing banks charge merchants each time a consumer uses a debit card) collected by banks with assets of $10 billion or more.

Under the temporary relief provisions of a joint rule published by the OCC, the FDIC, and the FRB, the Bank received relief from Dodd-Frank limitations on debit card interchange fees collected by banks with assets of $10 billion or more.

At December 31, 2021, the Bank was exempt from this rule but will be subject to reduced interchange fees beginning in July 2022.

In addition, market forces may result in reduced fees charged by all issuers, regardless of asset size, which may result in reduced revenues for the Bank.

For the year ended December 31, 2021, the Bank’s revenues from interchange fees were $12.7 million, an increase of $1.8 million from 2020.

See Regulation and Supervision, General, The Dodd-Frank Act .

As part of its lending activity, the Company may enter into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan agreement to a fixed-rate commercial loan agreement.

As part of its lending activity, the Company may enter into interest rate swaps that allow commercial loan customers to effectively convert a variable-rate commercial loan to a fixed-rate commercial loan.

Under these agreements, the Company enters into a variable rate loan agreement with a customer in addition to an interest rate swap agreement, which serves to effectively swap the customer’s variable rate loan into a fixed rate loan.

The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement.

The Company then enters into a corresponding swap agreement with a third party in order to economically hedge its exposure through the customer agreement, as well as more broadly hedges variable cash flows associated with its floating rate loans.

Offering these products can subject the Company to additional regulatory oversight and cost, as well as additional risk.

The Dodd-Frank Act contains a comprehensive framework for over-the-counter (“OTC”) derivatives transactions.

Even though many of the requirements do not impact the Company directly, since the Bank does not meet the definition of swap dealer or “major swap participant,” the Company continues to review and evaluate the extent to which such requirements impact its business indirectly.

A rule issued by the Commodity Futures Trading Commission (“CFTC”) sets the permanent aggregate gross notional amount threshold for the de minimis exception from the definition of swap dealer at $8.0 billion in swap dealing activity entered into by a person over the preceding 12 months.

The Bank’s swap dealing activities are currently below this threshold.

The USA Patriot and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering, terrorist financing and other illicit activities.

If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S.

Treasury’s Office of Financial Crimes Enforcement Network.

These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts.

The Dodd-Frank Act contains a comprehensive framework for over-the-counter derivatives transactions.

evaluate the extent to which such requirements impact its business indirectly or if and when such requirements may apply to the Bank directly.

The Commodity Futures Trading Commission set the permanent aggregate gross notional amount threshold for the de minimis exception from the definition of swap dealer at $8.0 billion in swap dealing activity entered into by a person over the preceding 12 months.

The Company’s swap dealing activities are currently below this threshold.

The USA Patriot and Bank Secrecy Acts require financial institutions to develop programs and procedures to prevent financial institutions from being used for money laundering, terrorist financing and other illicit activities, including filing suspicious activity reports and establishing procedures for identifying and verifying the identity of customers seeking to open new financial accounts.

Failure to comply with these regulations could result in wide variety of sanctions, including payment of damages and civil money penalties, injunctive relief, and restrictions on mergers and acquisitions activity and expansion.

Although the Bank has developed policies and procedures designated to comply with these laws and regulations, these policies and procedures may not be effective in preventing violations of these laws and regulations.

Although the Company has developed policies and procedures designated to comply with these laws and regulations, these policies and procedures may not be effective in preventing violations of these laws and regulations.

The Company is subject to stringent capital requirements, which may adversely impact return on equity, require additional capital raises, or limit the ability to pay dividends or repurchase shares .

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Their use also affects interest rates charged on loans or paid on deposits.

The monetary policies and regulations of the Federal Reserve Board have a significant effect on the operating results of financial institutions.

However, the extent of such policies upon the Company’s business, financial condition, and results of operations cannot be predicted.

The monetary policies and regulations of the Federal Reserve Board have a significant effect on the overall economy and the operating results of financial institutions.

The Company is subject to the CRA and fair lending laws, and failure to comply with these laws could lead to material penalties .

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A successful regulatory challenge to an institution’s performance under the CRA or fair lending laws and regulations could result in sanctions, including payment of damages and civil money penalties, injunctive relief, and restrictions on mergers and acquisitions activity and expansion.

Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation.

Private parties may also challenge an institution’s performance under fair lending laws in private class action litigation.

Such actions could have a material adverse effect on the Company’s business, financial condition, and results of operations.

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The Company is subject to heightened regulatory requirements as a result of total assets exceeding $10 billion .

The Company’s total assets were $11.7 billion at December 31, 2021 and banks or financial institutions with assets in excess of $10 billion are subject to requirements imposed by the Dodd-Frank Act and its implementing regulations, including:

the examination authority of the CFPB to assess compliance with federal consumer financial laws, imposition of higher FDIC premiums, reduced debit card interchange fees, and enhanced risk management frameworks, all of which increase operating costs and reduce earnings.

The Company’s total assets were $13.1 billion at December 31, 2022 and banks or financial institutions with assets in excess of $10 billion are subject to requirements imposed by the Dodd-Frank Act and its implementing regulations, including the examination authority

of the CFPB to assess compliance with federal consumer financial laws, imposition of higher FDIC premiums, reduced debit card interchange fees, and enhanced risk management frameworks, all of which increase operating costs and reduce earnings.

Additional costs have been and will be incurred to implement processes, procedures, and monitoring of compliance with these imposed requirements, including investing significant management attention and resources to make the necessary changes to comply with the requirements under the Dodd-Frank Act.

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While the effect of any presently contemplated or future changes in the laws or regulations or their interpretations would have is unpredictable, these changes could be materially adverse to the Company’s investors.

Furthermore, the level of dividends the Bank receives from the Federal Reserve Bank of Philadelphia is reduced for financial institutions that exceed a certain asset size.

Furthermore, the level of dividends the Company receives from the Federal Reserve Bank of Philadelphia is reduced due to its asset size.

The asset size was originally established at $10 billion, but has been increased for inflation such that, for 2022, the asset level is $11.23 billion.

Financial institutions whose assets exceed that level receive dividends generally equal to the rate of the 10-year Treasury note, as opposed to 6% for smaller financial institutions.

Such reduction has significantly decreased the dividends received from the Federal Reserve Bank of Philadelphia, which totaled $591,000 for the year ended December 31, 2021.

Such reduction has significantly decreased the dividends received from the Federal Reserve Bank of Philadelphia, which totaled $1.3 million for the year ended December 31, 2022.

Risks Related to Dividend Payments

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Many of these competitors enjoy advantages, including greater financial resources and access to capital, stronger regulatory ratios and higher lending limits, a wider geographic presence, more accessible branch office locations, the ability to offer a wider array of services or more favorable pricing alternatives, as well as lower origination and operating costs.

In addition, rapid technological changes and consumer preferences may result in

increased competition for the Bank’s services.

Increased competition could reduce the Company’s net income by decreasing the number and size of loans that the Bank originates and the interest rates charged on these loans.

In addition, rapid technological changes and consumer preferences may result in increased competition for the Company’s services.

Increased competition could reduce the Company’s net income by decreasing the number and size of loans that the Company originates and the interest rates charged on these loans.

Competitive factors driven by consumer sentiment or otherwise can also reduce the Company’s ability to generate fee income, such as through overdraft fees.

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Should this proposal be adopted and a state owned bank formed, it could impede the Company’s ability to attract and retain governmental and municipal deposits and financing opportunities.

Public fund deposits from local government entities such as counties, townships, school districts and other municipalities generally have highe r average balances and the Bank’s inability to retain such funds could adversely affect liquidity or result in the use of higher-cost funding sources.

Public fund deposits from local government entities such as counties, townships, school districts and other municipalities generally have highe r average balances and the Company ’s inability to retain such funds could adversely affect liquidity or result in the use of higher-cost funding sources.

Risks Related to Strategic Matters

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The Company’s inability to tailor its retail delivery model to respond to consumer preferences in banking may negatively affect earnings .

The Bank has expanded its market presence through acquisitions and growth in lending teams.

The branch continues to be a very significant source of new business generation, however, consumers continue to migrate much of their routine banking to self-service channels.

In recognition of this shift in consumer patterns, the Bank has undertaken a comprehensive review of its branch network, resulting in branch consolidation accompanied by the enhancement of the Bank’s capabilities to serve its customers through alternate delivery channels.

The benefits of this strategy are dependent on the Bank’s ability to realize expected expense reductions without experiencing significant customer attrition.

The Company has expanded its market presence through acquisitions and growth.

The Company’s branch network continues to be a very significant source of new business generation, however, consumers continue to migrate much of their routine banking to self-service channels.

In recognition of this shift in consumer patterns, the Company has undertaken a comprehensive review of its branch network, resulting in branch consolidation accompanied by the enhancement of the Company’s capabilities to serve its customers through alternate delivery channels.

The benefits of this strategy are dependent on the Company’s ability to realize expected expense reductions without experiencing significant customer attrition.

Risks Related to Operational Matters

Risks associated with system failures, interruptions, or breaches of security could disrupt businesses, result in the disclosure of confidential information, damage the reputation of, and create significant financial and legal exposure for the Company .

Information technology systems are critical to the Company’s business.

The business is required to collect, process, transmit and store significant amounts of confidential information regarding the Company’s customers, employees and its own business, operations, plans and business strategies.

Information technology systems are critical to the Company’s business, which, is required to collect, process, transmit and store significant amounts of confidential information regarding the Company’s customers, employees and its own business, operations, plans and business strategies.

The Company uses various technology systems to manage customer relationships, deposits and loans, general ledger, securities investments, and other processes.

The computer systems, data management and internal processes, as well as those of third parties, are integral to the Company’s performance.

The operational risks include the risk of malfeasance by employees or persons outside the Company, errors relating to transaction processing and technology, systems failures or interruptions, failures to properly implement systems upgrades, breaches of the Company’s internal control systems and compliance requirements, and business continuation and disaster recovery.

The heavy reliance on information technology systems exposes the Company to operational risks, which include the risk of malfeasance by employees or persons outside the Company, errors relating to transaction processing and technology, systems failures or interruptions, failures to properly implement systems upgrades, breaches of the Company’s internal control systems and compliance requirements, and business continuation and disaster recovery.

Financial institutions and companies have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to confidential information, destroy data, disrupt or degrade se rvice, sabotage systems or cause other damage, often through the introduction of computer viruses or malware, cyberattacks, ransomware and other means.

Additionally, there is the risk of distributed denial-of-service or other similar attacks from technically sophisticated and well-resourced third parties, which are intended to disrupt online services.

Despite the Company’s efforts to ensure the integrity of its systems, the Company may not be able to implement effective preventive measures against all security breaches, especially because the techniques used change frequently or are not recognized until launched, and because cyberattacks can originate from a wide variety of sources.

recognized until launched, and because cyberattacks can originate from a wide variety of sources.

Those parties may also attempt to fraudulently induce employees, customers or other users of the Company’s systems to disclose sensitive information in order to gain access to the Company’s data or that of its customers or clients.

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While management regularly reviews security assessments that were conducted on the Company’s third-party service providers that have access to sensitive and confidential information, there can be no assurance that their information security protocols are sufficient to withstand a cyber-attack or other security breach.

The occurrence of any system failures, interruption, or breach of security of the Company’s or its vendors’ systems could cause serious negative consequences for the Company, including significant disruption of the Company’s operations, misappropriation of confidential information of the Company or that of its customers, or damage to computers or systems of the Company and those of its customers and counterparties, and could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss of confidence in the Company’s security measures, customer dissatisfaction, significant litigation exposure, and harm to the Company’s reputation, all of which could have a material adverse effect on the Company.

The occurrence of any system failures, interruption, or breach of security of the Company’s or its vendors’ systems could cause serious negative consequences for the Company, including significant disruption of the Company’s operations, misappropriation of confidential information of the Company or that of its customers, or damage to computers or systems of the Company and those of its customers and counterparties, and which could result in violations of applicable privacy and other laws, financial loss to the Company or to its customers, loss of confidence in the Company’s security measures, customer dissatisfaction, significant litigation exposure, and harm to the Company’s reputation, all of which could have a material adverse effect on the Company.

An inability to attract and retain qualified personnel or the unexpected loss of service of any key personnel could have a negative impact on financial condition and results of operations.

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Management routinely reviews and updates internal controls.

Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide

only reasonable, not absolute, assurances that the objectives of the system are met.

Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met.

Any failure or circumvention of the controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on the Company, the results of operations and financial condition, investor confidence, and stock price.

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Hurricanes and other natural disasters, climate change or increases to flood insurance premiums could adversely affect asset quality and earnings .

The Bank’s trade area includes counties in New Jersey with extensive coastal regions.

The Company’s trade area includes counties in New Jersey with extensive coastal regions.

These areas may be vulnerable to flooding or other damage from future storms or hurricanes, which could negatively impact the Company’s results of operations by disrupting operations, adversely impacting the ability of the Company’s borrowers to repay their loans, damaging collateral or reducing the value of real estate used as collateral.

The Company’s business, financial condition, and results of operations could be adversely affected by natural disasters, health epidemics, and other catastrophic events.

The Company could be adversely affected if key personnel or a significant number of employees were to become unavailable due to a pandemic disease, natural disaster, war, act of terrorism, accident, or other reason.

The Company could be adversely affected if key personnel or a significant number of employees were to become unavailable due to a pandemic, natural disaster, war, act of terrorism, accident, or other reason.

Any of these events could result in the temporary reduction of operations, employees, and customers, which could limit the Company’s ability to provide services.

Further, given the inter-connectivity of the global economy, pandemic disease and health events have the potential to negatively impact economic activities in many countries, including the United States, including the business of the Bank’s borrowers.

Additionally, many of the Company’s borrowers may suffer property damage, experience interruptions of their business or lose their jobs after such events.

Those borrowers might not be able to repay their loans, and the collateral for such loans may decline significantly in value.

Additionally, global markets may be adversely affected by the emergence of widespread health emergencies or pandemics.

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Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to mitigate those impacts.

Consumers and businesses also may change their behavior on their own as a result of these concerns.

Consumers and businesses also may change their behavior as a result of these concerns.

The Company and its customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns.

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Changes in card network fees could impact the Company’s operations .

From time to time, the card networks increase the fees (known as interchange fees) that they charge to acquirers and that the Bank charges its merchants.

It is possible that competitive pressures will result in the Bank absorbing a portion of such increases in the future, which would increase costs, reduce profit margin and adversely affect the Company’s business and financial condition.

From time to time, the card networks increase the fees (known as interchange fees) that they charge to acquirers and that the Company charges its merchants.

It is possible that competitive pressures will result in the Company absorbing a portion of such increases in the future, which would increase costs, reduce profit margin and adversely affect the Company’s business and financial condition.

In addition, the card networks require certain capital requirements.

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The Company is a member of the Visa and MasterCard networks.

As such, the Company is subject to card network rules resulting in a variety of fines or

penalties that may be assessed on the Company.

The termination of membership or any changes in card network rules or standards, including interpretation and implementation of existing rules or standards, could increase the cost of operating merchant servicer business or limit the ability to provide debit card and cash management solutions to or through customers, and could have a material adverse effect on the Company’s business, financial condition, and results of operations.

As such, the Company is subject to card network rules resulting in a variety of fines or penalties that may be assessed on the Company.

The termination of membership or any changes in card network rules or standards, including interpretation and implementation of existing rules or standards, could increase the cost of operating the merchant services business or limit the ability to provide debit card and cash management solutions to or through customers, and could have a material adverse effect on the Company’s business, financial condition, and results of operations.

Risks Related to the COVID-19 Pandemic

Federal and state agencies may pass measures to address the economic and social consequences of the pandemic that could impact the Company’s financial results and have a destabilizing effect on financial markets, key market indices, and overall economic activity.

Prolonged measures by public health or other governmental authorities encouraging or requiring significant restrictions on travel, assembly, or other core business practices would further harm the Company’s business and that of its customers, in particular small to medium-sized business customers.

Although the Company has business continuity plans and other safeguards in place, there is no assurance that they will be effective.

A decline in economic conditions generally and a prolonged negative impact on small to medium-sized businesses, in particular, due to the COVID-19 pandemic could result in a material adverse effect on the Company’s business, financial condition, and results of operations and may heighten many of the known risks described herein and in other filings with the SEC.

Other Risks Related to the Business

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In addition, these reforms may require changes to existing contracts that govern LIBOR based products as well as the Company’s systems and processes.

FEDERAL AND STATE TAXATION

Federal Taxation

The Company and the Bank report their income on a calendar year basis using the accrual method of accounting, and are subject to Federal income taxation in the same manner as other corporations with some exceptions, including particularly the Bank’s reserve for bad debts.

The following discussion of tax matters is intended only as a summary and does not purport to be a comprehensive description of the tax rules applicable to the Bank or the Company.

The current applicable statutory tax rate is 21%.

Dividends Received Deduction and Other Matters .

The Company may exclude from its income 100% of dividends received from the Bank as a member of the same affiliated group of corporations.

The corporate dividends received deduction is generally 50% in the case of dividends received from unaffiliated corporations with which the Company and the Bank will not file a consolidated tax return, except that if the Company or the Bank own more than 20% of the stock of a corporation distributing a dividend then 65% of any dividends received may be deducted.

Inflation Reduction Act of 2022.

The Inflation Reduction Act was signed into law by President Biden on August 16, 2022 which, amongst other things, implements a new alternative minimum tax of 15% on corporations with profits in excess of $1 billion, a 1% excise tax on stock repurchases, and several tax incentives to promote clean energy and climate initiatives.

These provisions are effective beginning January 1, 2023.

Based on its analysis of the provisions, the Company does not expect this legislation to have a material impact on its consolidated financial statements.

State and Local Taxation

New Jersey Taxation .

The Company files New Jersey income tax returns.

For this purpose, taxable income generally means Federal taxable income, excluding some entities not included in the unitary filing and other adjustments (including addition of interest income on state and municipal obligations).

The Company is required to file a New Jersey income tax return because it does business in New Jersey.

For New Jersey tax purposes, regular corporations are presently taxed at a rate equal to 9% of taxable income.

New Jersey also imposes a temporary surtax of 2.5% which is effective through December 31, 2023.

For 2019 and prospectively, New Jersey law requires combined filing for members of an affiliated group, but excludes companies that qualify as a New Jersey Investment Company and Real Estate Investment Companies.

The allocation and apportionment of taxable income to New Jersey may affect the overall tax rate.

New York Taxation .

The Company is required to file New York State, MTA, and New York City tax returns.

The New York State and New York City returns require consolidation of all entities, including OceanFirst Realty, and taxable income,

consistent with other states, generally means Federal taxable income subject to certain adjustments.

The allocation and apportionment of taxable income to New York State and New York City may affect the overall tax rate.

Pennsylvania Taxation .

The Bank is required to file a Pennsylvania bank shares tax return.

The Bank’s net assets, less allowable deductions, are taxed at a rate presently equal to 0.95% of apportioned net assets.

The allocation and apportionment to Pennsylvania may affect the overall tax rate.

Delaware Taxation .

As a Delaware holding company not earning income in Delaware, the Company is exempted from Delaware corporate income tax but is required to file an annual report with and pay an annual franchise tax to the State of Delaware.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors