What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-23 compared with 2023-02-24 · 326 added, 295 removed, 1424 unchanged (30% of the section changed)

4 unchanged sentences

We have audited the accompanying consolidated statements of financial condition of OceanFirst Financial Corp.

and subsidiaries (the "Company") as of December 31, 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows, for the year ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows, for the years ended December 31, 2023 and 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years ended December 31, 2023 and 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

10 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Allowance for loan credit losses - Refer to Notes 1 and 5 to the financial statements

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• We assessed the reasonableness of the Company’s qualitative methodology, tested key calculations utilized within the qualitative estimate and agreed underlying data within the calculation to source documents.

Goodwill - Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company performs an annual goodwill impairment test over the Company’s single reporting unit, as of August 31st or whenever certain triggering events occur or if changes in circumstances indicate potential impairment.

An impairment charge is recognized when and to the extent the Company’s carrying amount is determined to exceed its fair value.

The results of the quantitative assessment indicated that the fair value of the Company’s reporting unit exceeded its carrying amount as of the measurement date, which resulted in no impairment.

The Company did not identify any triggering events between the annual assessment date and December 31, 2023.

The Company estimated the fair value of its single reporting unit using a combination of an income approach and a market approach.

The income approach utilized a discounted cash flow (“DCF”) analysis.

A DCF analysis requires significant judgment to model financial forecasts, which includes loan and deposit growth, funding mix, income on securities, credit performance, forward interest rates, future returns driven by net interest margin, fee generation and expense incurrence, industry and economic trends, and other relevant considerations.

For periods beyond those forecasted, a terminal value was estimated based on an assumed long-term growth rate, which was derived using the Gordon Growth Model.

The discount rate applied to the forecasted cash flows was calculated using a build-up approach, which starts with the risk-free interest rate and then calibrated for market and company specific risk premiums, including a beta, equity risk, size, and company-specific risk premiums to reflect risks and uncertainties in the financial market and in the Company’s business projections.

The market approach utilizes observable market data from comparable public companies, including price-to-tangible book value ratios, to estimate the Company’s fair value.

The market approach also incorporates a control premium to represent the Company’s expectation of a hypothetical acquisition.

Management uses judgment in the selection of comparable companies and includes those with similar business activities, and related operating environments.

Auditing the fair value of the Company involves a high degree of subjectivity, including the need to involve our fair value specialists, as it relates to evaluating whether management's judgments in determining whether the financial forecasts, selection of terminal value growth rates and the weighted-average cost of capital used to determine the discount rates were appropriate.

We also needed to evaluate whether management's judgement in selection of comparable companies within the market approach is appropriate.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the judgements made by management included the following, among others:

• We evaluated the reasonableness of the Company’s valuation methodologies as well as the weightings assigned to each analysis.

• We tested the design and operating effectiveness of controls over goodwill, including financial forecasts, the selection of the terminal value growth rate, cost of equity used to determine the discount rate, and selection of control premium.

• We evaluated the reasonableness of the Company’s financial forecasts, including forecasted revenue growth rates, by comparing to (1) historical results, (2) internal communications to management and the Board of Directors, and (3) forecasted information included in Company press releases and analyst reports of the Company and companies in its peer group.

• With the assistance of our fair value specialists, we evaluated the discount rate, terminal value growth rate, and control premium used by the Company, including testing the underlying source information and the mathematical accuracy of the calculations by developing a range of independent estimates and comparing to those selected by management.

/s/ Deloitte & Touche LLP

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of financial condition of OceanFirst Financial Corp.

and subsidiaries (the Company) as of December 31, 2021, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the two‑year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for each of the years in the two‑year period ended December 31, 2021, in conformity with U.S.

We have audited the accompanying consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows of OceanFirst Financial Corp.

and subsidiaries (the Company) for the year ended December 31, 2021, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations of the Company and its cash flows for the year ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

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These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor from 1989 to 2022.

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1,159,735 1,221,138

Equity investments (encumbered of $ 40,122 at December 31, 2021)

102,037 101,155

Equity investments 100,163 102,037

Restricted equity investments, at cost 93,766 109,278

3 unchanged sentences

Interest and dividends receivable 51,874 44,704

Other real estate owned — 106

Premises and equipment, net 121,372 126,705

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Net interest income 369,731 377,477 305,338

Credit loss expense (benefit) 7,768 ( 11,832 ) 59,404

Net interest income after credit loss expense (benefit) 369,709 317,170 253,547

Provision for credit losses (benefit) 17,678 7,768 ( 11,832 )

Net interest income after provision for credit losses (benefit) 352,053 369,709 317,170

Other income:

3 unchanged sentences

Net gain on sales of loans 428 358 3,186

Net gain on equity investments 9,685 7,145 21,214

Net (loss) gain on equity investments ( 3,732 ) 9,685 7,145

Net gain (loss) from other real estate operations — 48 ( 15 )

12 unchanged sentences

Professional fees 18,297 12,993 11,043

FHLB advance prepayment fees — — 14,257

Amortization of core deposit intangible 3,984 4,718 5,453

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Net income $ 104,065 $ 147,357 $ 110,076

Other comprehensive (loss) income:

Unrealized (loss) gain on debt securities (net of tax benefit of $ 10,629 and $ 1,142 in 2022 and 2021, respectively, and tax expense of $ 411 in and 2020)

Other comprehensive income (loss):

Unrealized gain (loss) on debt securities (net of tax expense of $ 4,560 in 2023, and tax benefit of $ 10,629 and $ 1,142 in 2022 and 2021, respectively)

14,312 ( 33,402 ) ( 3,837 )

Accretion of unrealized loss on debt securities reclassified to held-to-maturity (net of tax expense of $ 213 , $ 242 and $ 272 in 2023, 2022, and 2021, respectively)

Unrealized loss on derivative hedges (net of tax benefit of $ 8 in 2022)

Reclassification adjustment on debt securities for (gains) loss included in net income (net of tax benefit of $ 26 in 2022 and tax expense of $ 101 in 2020)

Total other comprehensive (loss) income, net of tax ( 33,161 ) ( 3,442 ) 1,829

Unrealized loss on derivative hedges (net of tax benefit of $ 257 and $ 8 in 2023 and 2022, respectively)

( 808 ) ( 25 ) —

Reclassification adjustment for loss (gains) included in net income (net of tax expense of $ 423 in 2023 and tax benefit of $ 26 in 2022, respectively)

1,326 ( 82 ) —

Total other comprehensive income (loss), net of tax 15,120 ( 33,161 ) ( 3,442 )

Total comprehensive income 119,185 114,196 106,634

18 unchanged sentences

Net income — — — 110,076 — — — — 110,076

Other comprehensive income, net

Other comprehensive loss, net

of tax — — — — ( 3,442 ) — — — ( 3,442 )

Stock compensation — — 5,415 — — — — — 5,415

Effect of adopting ASU

2016-13 — — — ( 4 ) — — — — ( 4 )

Acquisition of common

stock by ESOP — — — — — ( 3,200 ) ( 3,200 )

Allocation of ESOP stock — — 179 — — 2,018 — — 2,197

4 unchanged sentences

— — — — — — ( 36,059 ) ( 36,059 )

Proceeds from preferred stock issuance, net of costs 1 — 55,528 — — — — — 55,529

Preferred stock dividend — — — ( 4,016 ) — — — — ( 4,016 )

Acquisition of Two River Bancorp (“Two River”) — 42 122,501 — — — 26,066 — 148,609

Acquisition of Country Bank Holding Company, Inc.

(“Country Bank”) — 44 112,792 — — — — — 112,836

Balance at December 31, 2021 1 611 1,146,781 442,306 ( 2,821 ) ( 8,615 ) ( 61,710 ) — 1,516,553

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Stock compensation — — 6,638 — — — — — 6,638

Acquisition of common

stock by ESOP — — — — — ( 3,200 ) — — ( 3,200 )

Allocation of ESOP stock — — 82 — — 2,424 — — 2,506

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Preferred stock dividend — — — ( 4,016 ) — — — — ( 4,016 )

Acquisition of Trident Abstract Title Agency, LLC (“Trident”) — — — — — — — 836 836

Distribution to non-controlling interest — — — 6 — — — ( 788 ) ( 782 )

Balance at December 31, 2022 1 612 1,154,821 540,507 ( 35,982 ) ( 6,191 ) ( 69,106 ) 802 1,585,464

Net income — — — 104,029 — — — 36 104,065

Other comprehensive loss, net of tax

Other comprehensive income, net of tax

— — — — 15,120 — — — 15,120

4 unchanged sentences

Exercise of stock options — 1 1,421 ( 720 ) — — — — 702

Repurchase 373,223 shares of

— — — — — — ( 7,396 ) — ( 7,396 )

Preferred stock dividend — — — ( 4,016 ) — — — — ( 4,016 )

Acquisition of Trident Abstract Title Agency, LLC (“Trident”) — — — — — — — 836 836

Distribution to non-controlling interest — — — — — — — ( 55 ) ( 55 )

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Net amortization of deferred costs on borrowings 598 548 824

Net amortization of deferred costs and discounts on loans 1,129 1,242 4,872

Credit loss expense (benefit) 7,768 ( 11,832 ) 59,404

Deferred tax provision (benefit) 1,777 3,608 ( 4,615 )

Net gain on sale and write-down of other real estate owned ( 54 ) — ( 390 )

Net amortization of deferred fees/costs and premiums/discounts on loans ( 1,094 ) 1,129 1,242

Provision for credit losses (benefit) 17,678 7,768 ( 11,832 )

Deferred tax provision 3,151 1,777 3,608

Net gain on sale of other real estate owned — ( 54 ) —

Net write-down of fixed assets held-for-sale to net realizable value 459 1,482 7,787

Net gain on sale of fixed assets ( 26 ) ( 38 ) —

Net gain on equity investments ( 9,685 ) ( 7,145 ) ( 21,214 )

Net loss (gain) on equity investments 3,732 ( 9,685 ) ( 7,145 )

Net gain on sales of loans ( 428 ) ( 358 ) ( 3,186 )

Net loss on sale of available-for-sale securities 697 — —

Proceeds from sales of residential loans held for sale 58,495 12,616 102,648

1 unchanged sentence

Increase in value of bank owned life insurance ( 5,280 ) ( 6,578 ) ( 6,832 )

Net gain on sale of assets held for sale ( 1,959 ) ( 318 ) ( 21 )

Net loss (gain) on sale of assets held for sale 233 ( 1,959 ) ( 318 )

(Increase) decrease in interest and dividends receivable ( 7,170 ) ( 12,098 ) 2,663

(Increase) decrease in other assets ( 80,233 ) 33,093 17,030

Increase (decrease) in other liabilities 178,684 ( 35,287 ) 74,494

Decrease (increase) in other assets 34,504 ( 80,233 ) 33,093

(Decrease) increase in other liabilities ( 44,663 ) 178,684 ( 35,287 )

Total adjustments 20,196 103,093 49,896

2 unchanged sentences

Net increase in loans receivable ( 243,545 ) ( 1,126,997 ) ( 556,449 )

Purchases of loans receivable ( 171,623 ) ( 301,954 ) —

Purchases of loan pools ( 35,904 ) ( 171,623 ) ( 301,954 )

Premiums paid on purchased loan pools ( 1,210 ) ( 866 ) ( 8,874 )

6 unchanged sentences

Proceeds from sales of debt securities available-for-sale 1,300 30,257 3,000

Proceeds from sales of debt securities held-to-maturity — — 12,450

Proceeds from sales of equity investments 4,822 19,234 98,777

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Purchases of operating lease equipment — ( 4,789 ) —

Cash consideration received for acquisition 38,609 — 23,460

Net cash consideration received for acquisition — 38,609 —

Net cash used in investing activities ( 487,997 ) ( 1,321,008 ) ( 1,477,842 )

Cash flows from financing activities:

Net (decrease) increase in deposits ( 56,963 ) 407,569 1,507,943

Net increase (decrease) in deposits 760,023 ( 56,963 ) 407,569

Net payment for sale of branches — — ( 86,282 )

Decrease in short-term borrowings ( 49,672 ) ( 9,685 ) ( 226,018 )

Net proceeds from FHLB advances 1,211,166 — 525,000

Repayments of FHLB advances — — ( 840,200 )

Net proceeds from issuance of subordinated notes — — 122,180

Proceeds from Federal Reserve Bank advances — — 53,778

Repayments from Federal Reserve Bank advances — — ( 53,778 )

Increase (decrease) in short-term borrowings 3,950 ( 49,672 ) ( 9,685 )

Net (repayment) proceeds from FHLB advances ( 362,530 ) 1,211,166 —

Repayments of other borrowings — ( 35,104 ) ( 7,612 )

Increase (decrease) in advances by borrowers for taxes and insurance 1,100 3,009 ( 2,803 )

Increase in advances by borrowers for taxes and insurance 1,002 1,100 3,009

Exercise of stock options 702 424 1,946

1 unchanged sentence

Purchase of treasury stock — ( 7,396 ) ( 36,059 )

Net proceeds from the issuance of preferred stock — — 55,529

Acquisition of common stock by ESOP — — ( 3,200 )

2 unchanged sentences

Net cash provided by financing activities 349,468 1,013,760 223,993

Net (decrease) increase in cash and due from banks and restricted cash ( 56,798 ) ( 1,093,877 ) 1,185,435

Net decrease in cash and due from banks and restricted cash ( 14,268 ) ( 56,798 ) ( 1,093,877 )

Cash and due from banks and restricted cash at beginning of year 167,986 224,784 1,318,661

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Accretion of unrealized loss on securities reclassified to held-to-maturity 503 590 667

Net loan (recoveries) charge-offs ( 340 ) ( 442 ) 18,859

Net loan charge-offs (recoveries) 8,382 ( 340 ) ( 442 )

Transfer of premises and equipment to assets held-for-sale 1,302 2,776 4,035

Transfer of debt securities from available-for-sale to held-to-maturity — — 12,721

Transfer of loans receivable to other real estate owned — — 106

Transfer of loans receivable to loans held-for-sale — 13,178 —

6 unchanged sentences

Non-cash assets acquired:

Securities $ — $ — $ 208,880

Restricted equity investments — — 5,334

Loans — — 1,558,480

Other current assets — 238 —

1 unchanged sentence

Right of use ("ROU") asset — 779 —

Accrued interest receivable — — 4,161

Bank owned life insurance — — 22,440

Deferred tax asset — — 41

Other assets — 81 —

Goodwill and other intangible assets, net 5,827 — 139,501

Total non-cash assets acquired $ — $ 1,116 $ —

Liabilities assumed:

Deposits $ — $ — $ 1,594,403

Borrowings — — 92,618

Lease liability — 779 —

10 unchanged sentences

and a majority controlling interest in Trident Abstract Title Agency, LLC.

Certain other subsidiaries were dissolved in 2022 and 2020 and are included in the consolidated financial statements for prior periods.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain amounts previously reported have been reclassified to conform to the current year’s presentation.

The Bank provides a range of regional community banking services to retail and commercial customers through a network of branches and offices throughout New Jersey and in the major metropolitan areas of Philadelphia, New York, Baltimore, and Boston.

6 unchanged sentences

These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses.

A material estimate that is particularly susceptible to significant change in the near term relates to the determination of the allowance for credit losses.

Material estimates that are particularly susceptible to significant change in the near term include the determination of the allowance for credit losses and goodwill.

These estimates and assumptions are based on management’s best estimates and judgment.

10 unchanged sentences

Mortgage-backed securities include:

agency residential mortgage-backed securities which are issued and guaranteed by either the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”), or the Government National Mortgage Association (“GNMA”);

agency commercial mortgage-backed securities which are issued and guaranteed by the Small Business Administration (“SBA”), or agency commercial mortgage-backed securities (“ACMBS”);

and non-agency commercial mortgage-backed securities which are issued and guaranteed by commercial mortgage-backed securities (“CMBS”), and collateralized mortgage obligations (“CMOs”).

agency residential and commercial mortgage-backed securities which are issued and guaranteed by one of the Federal Home Loan Mortgage Corporation (“FHLMC”), the Federal National Mortgage Association (“FNMA”), the Government National Mortgage Association (“GNMA”), or the Small Business Administration (“SBA”);

and non-agency commercial mortgage-backed securities.

Management determines the appropriate classification at the time of purchase.

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Such securities are carried at estimated fair value and unrealized gains and losses, net of related tax effect, are excluded from earnings, but are included as a separate component of stockholders’ equity and as part of other comprehensive income.

Discounts and premiums on securities are accreted or amortized using the level-yield method over the estimated lives of the securities, including the effect of

Gains or losses on the sale of such securities are included in other income using the specific identification method.

Discounts and premiums on debt securities are accreted or amortized using the level-yield method over the estimated lives of the securities, including the effect of prepayments.

Upon the transfer of debt securities from AFS to HTM classification, unrealized gains or losses at the transfer date continue to be reflected in accumulated other comprehensive income and are amortized into interest income over the remaining life of the securities.

1 unchanged sentence

Equity investments with readily determinable fair value are reported at fair value, with changes in fair value reported in net income.

Equity investments without readily determinable fair values are carried at cost less impairment, if any, plus or minus adjustments resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer.

Certain equity investments without readily determinable fair values are measured at net asset value (“NAV”) per share as a practical expedient.

Credit Losses for Available-for-Sale Debt Securities

5 unchanged sentences

If a determination is made that an AFS debt security is impaired, the Company will estimate the amount of the unrealized loss that is attributable to credit and all other non-credit related factors.

The credit related component will be recognized as a securities credit loss expense through an allowance for securities credit losses.

The securities credit loss expense will be limited to the difference between the security’s amortized cost basis and fair value and any future changes may be reversed, limited to the amount previously expensed, in the period they occur.

The credit related component will be recognized as a securities provision for credit losses through an allowance for securities credit losses.

The securities provision for credit losses will be limited to the difference between the security’s amortized cost basis and fair value and any future changes may be reversed, limited to the amount previously expensed, in the period they occur.

The non-credit related component will be recorded as an adjustment to accumulated other comprehensive income, net of tax.

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Loans held for sale are carried at the lower of unpaid principal balance, net, or estimated fair value on an aggregate basis.

Estimated fair value is generally determined based on bid quotations from securities dealers.

Estimated fair value is generally determined based on bid quotations from secondary markets.

Allowance for Credit Losses (“ACL”)

4 unchanged sentences

Therefore, the Company has made a policy election to exclude accrued interest from the amortized cost basis and therefore excludes it from the measurement of the ACL.

Expected credit losses are reflected in the ACL through a charge to credit loss expense.

Expected credit losses are reflected in the ACL through a charge to provision for credit losses.

The Company’s estimate of the ACL reflects credit losses currently expected over the remaining contractual life of the assets.

22 unchanged sentences

Fair value is generally calculated based on the value of the underlying collateral less an appraisal discount and the estimated cost to sell.

Troubled Debt Restructured (“TDR”) Loans

A loan that has been modified or renewed is considered a TDR when two conditions are met:

Modification to Borrowers Experiencing Financial Difficulty

The Company adopted Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023, which eliminated recognition and measurement for troubled debt restructuring (“TDR”) by creditors.

The Company considers a loan to be a modification to borrowers experiencing financial difficulty if (1) the borrower is experiencing financial difficulty;

and (2) the Company, for economic or legal reasons related to a borrower’s financial condition or difficulties, modifies the loan in the form of a reduction in interest rate, an extension in term, principal forgiveness, other than insignificant payment delay, or a combination thereof.

Troubled Debt Restructured Loans

Prior to the adoption of ASU 2022-02, the Company classified certain loans as TDR loans when credit terms to a borrower in financial difficulty were modified in accordance with ASC 310-40.

Since adoption of this ASU, the Company has ceased to recognize or measure for new TDRs but those existing at December 31, 2022 remain until settled.

A loan that had been modified or renewed was considered a TDR when two conditions were met:

(1) the borrower is experiencing financial difficulty and (2) concessions are made for the borrower's benefit that would not otherwise be considered for a borrower or transaction with similar credit risk characteristics.

1 unchanged sentence

For TDRs individually evaluated that have been modified and the interest rate is the primary concession, the ACL is measured using a discounted cash flow method.

Loans that were modified in accordance with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act are not considered TDRs.

Loan Commitments and Allowance for Loan Credit Losses on Off-Balance Sheet Credit Exposures

2 unchanged sentences

Such financial instruments are recorded when they are funded.

The Company records an allowance for loan credit losses on off-balance sheet credit exposures through a charge to loan credit loss expense for off-balance sheet credit exposures.

The Company records an allowance for loan credit losses on off-balance sheet credit exposures through a charge to loan provision for credit losses for off-balance sheet credit exposures.

The ACL on off-balance sheet credit exposures is estimated by portfolio segment at each balance sheet date under the CECL model using the same methodologies as portfolio loans, taking into consideration management’s assumption of the likelihood that funding will occur, and is included in other liabilities on the Company’s Consolidated Statements of Financial Condition.

6 unchanged sentences

(1) non-accrual status;

(2) troubled debt restructured designation;

(2) legacy troubled debt restructured designation;

(3) risk ratings of special mention, substandard or doubtful;

3 unchanged sentences

This initial allowance for credit losses is allocated to individual PCD loans and added to the purchase price or acquisition date fair values to establish the initial amortized cost basis of the PCD loans.

As the initial allowance for credit losses is added to the purchase price, there is no credit loss expense recognized upon acquisition of a PCD loan.

As the initial allowance for credit losses is added to the purchase price, there is no provision for credit losses recognized upon acquisition of a PCD loan.

Any difference between the unpaid principal balance of PCD loans and the amortized cost basis is considered to relate to noncredit factors and results in a discount or premium.

1 unchanged sentence

For acquired loans not deemed PCD at acquisition, the differences between the initial fair value and the unpaid principal balance are recognized as interest income on a level-yield basis over the lives of the related loans.

At the acquisition date, an initial allowance for expected credit losses is estimated and recorded as credit loss expense.

At the acquisition date, an initial allowance for expected credit losses is estimated and recorded as a provision for credit losses.

The subsequent measurement of expected credit losses for all acquired loans is the same as the subsequent measurement of expected credit losses for originated loans.

Other Real Estate Owned (“OREO”)

Other real estate owned is carried at the lower of cost or estimated fair value, less estimated costs to sell.

When a property is acquired, the excess of the loan balance over estimated fair value is charged to the allowance for credit losses for loans.

Operating results from other real estate owned, including rental income, operating expenses, gains and losses realized from the sales of other real estate owned, and subsequent write-downs are recorded as incurred.

During 2022, the remaining OREO was sold and there was no OREO as of December 31, 2022.

Premises and Equipment

9 unchanged sentences

Repair and maintenance items are expensed and improvements are capitalized.

Gains and losses on dispositions are reflected in branch consolidation expenses and other income.

The Company recognizes lease agreements on the Consolidated Statements of Financial Condition as a right-of-use (“ROU”) asset and a corresponding lease liability.

Gains and losses on dispositions are reflected in branch consolidation expenses, other operating expense and other income.

The Company recognizes lease agreements on the Consolidated Statements of Financial Condition as a ROU asset and a corresponding lease liability.

The ROU asset and lease liability are calculated as the present value of the minimum lease payments over the lease term, discounted for the rate implicit in the lease, provided the rate is readily determinable;

otherwise the Company utilizes its incremental borrowing rate, at lease inception, over a similar term.

otherwise the Company generally utilizes its incremental borrowing rate, at lease inception, over a similar term.

The Company utilizes the asset and liability method of accounting for income taxes.

11 unchanged sentences

Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets acquired through purchase acquisitions.

Goodwill with an indefinite useful life is not amortized, but is evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances indicate potential impairment between annual measurement dates.

Goodwill with an indefinite useful life is evaluated for impairment on an annual basis, or more frequently if events or changes in circumstances indicate potential impairment between annual measurement dates.

The Company prepares a qualitative assessment, and if necessary, a quantitative assessment, in determining whether goodwill may be impaired.

The factors considered in the qualitative assessment include macroeconomic conditions, industry and market conditions and overall financial performance of the Company, among other factors.

Under a quantitative assessment, the Company will estimate the fair value of the Company by utilizing a weighted discounted cash flow method, guideline public company method, and transaction method.

Under a quantitative assessment, the Company will estimate the fair value of the Company by assigning weightings to the discounted cash flow method and guideline public company method.

The Company completes its annual goodwill impairment test as of August 31 and evaluates triggering events during interim periods, as applicable.

The Company completed its annual goodwill impairment test as of August 31, 2023.

Based upon its qualitative assessment of goodwill, the Company concluded that goodwill was not impaired and no further quantitative analysis was warranted .

At December 31, 2022, management concluded no events or circumstances occurred subsequent to August 31, 2022 that would trigger another impairment test.

For the annual test, the Company bypassed the qualitative assessment and proceeded directly to the quantitative impairment test based on the stock price at measurement date and economic uncertainty and market volatility impacting the banking sector.

To perform the quantitative test, a combination of an income valuation methodology, comprising a discounted cash flow analysis, and a market valuation methodology, comprising the guideline public company method, was employed.

Management then assigned weightings to the two approaches to conclude on the estimated fair value.

The weightings took into consideration recent market volatility and the suppressed stock prices of the Company and the banking industry.

The discounted cash flow (“DCF”) estimated the present value of future cash flows.

A DCF analysis requires significant judgment to model financial forecasts, which included loan and deposit growth, funding mix, income on securities, credit performance, forward interest rates, future returns driven by net interest margin, fee generation and expense incurrence, industry and economic trends, and other relevant considerations.

For periods beyond those forecasted, a terminal value was

estimated based on an assumed long-term growth rate, which was derived using the Gordon Growth Model.

The discount rate applied to the forecasted cash flows was calculated using a build-up approach, which starts with the risk-free interest rate, which was then calibrated for market and company specific risk premiums, including a beta, equity risk, size, and company-specific risk premiums to reflect risks and uncertainties in the financial market and in the Company’s business projections.

The market approach utilizes observable market data from comparable public companies, including price-to-tangible book value ratios, to estimate the Company’s fair value.

The market approach also incorporates a control premium to represent the Company’s expectation of a hypothetical acquisition.

Management uses judgment in the selection of comparable companies and includes those with similar business activities, and related operating environments.

The results of the quantitative assessment indicated that the fair value of the Company’s reporting unit exceeded its carrying amount as of the measurement date, which resulted in no impairment loss at August 31, 2023.

The Company did not identify any triggering events between the annual assessment date and December 31, 2023.

Segment Reporting

10 unchanged sentences

Certain performance-based stock awards and the associated compensation expense fluctuates based on the estimated probability of achievement of the Company-defined performance goals.

The Company also recognizes compensation expense on phantom stock units, which are liability-classified time-based awards, over the requisite service period based on the Company’s grant date stock price and remeasured monthly.

Derivative Instruments

11 unchanged sentences

Accounting Pronouncements Adopted in 2023

In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes” as part of an initiative to reduce complexity in accounting standards for income taxes.

The amendments also improve consistent application of and simplify generally accepted accounting principles for other areas of Topic 740 by clarifying and amending existing guidance.

This update was effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2021.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

In December 2022, Financial Accounting Standards Board issued ASU 2022-06, “Deferral of the Sunset Date of Topic 848”, which was effective upon issuance.

In March 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-01 “Derivatives and Hedging (Topic 815):

Fair Value Hedging – Portfolio Layer Method”, which made targeted improvements to the optional hedge accounting model with the objective of improving hedge accounting to better portray the economic results of an entity’s risk management activities in its financial statements.

This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2022.

Early adoption is permitted for any entity that has adopted the amendments in ASU 2017-12 for the corresponding period.

The adoption of this standard did not have an impact on the Company’s consolidated financial statements, as the Company currently does not have any fair value hedges.

In March 2022, FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures”.

The amendments in this ASU were issued to (1) eliminate accounting guidance for TDRs by creditors, while enhancing disclosure requirements for loan refinancings and restructurings when a borrower is experiencing financial difficulty;

(2) require disclosures of current period gross write-offs by year of origination for financing receivables and net investments in leases.

For entities that have adopted the amendments in ASU 2016-13, Measurement of Credit Losses on Financial Instruments, this update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2022.

Early adoption is permitted.

The amendments in this ASU should be applied prospectively, except for the transition method related to the recognition and measurement of TDRs, where there is an option to apply a modified retrospective transition method, resulting in a cumulative-effect adjustment to retained earnings in the period of adoption.

The Company adopted this guidance prospectively, and the adoption of this standard did not have an impact on the Company’s consolidated financial statements.

In December 2022, FASB issued ASU 2022-06, “Deferral of the Sunset Date of Topic 848”, which was effective upon issuance.

The amendments in this ASU defer the sunset date of Topic 848 (Reference Rate Reform) from December 31, 2022 to December 31, 2024.

Topic 848, originally issued in 2020 and later amended in 2021, provides optional accounting expedients and exceptions for certain loan agreements, derivatives and other transactions affected by the transition away from LIBOR towards alternative reference rates.

As of December 31, 2021, the Company adopted certain of these practical expedients in Topic 848 and will continue to apply prospectively until December 31, 2024.

The Company does not expect this update to have a material impact on its consolidated financial statements.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

Transition from LIBOR

As of December 31, 2021, the Company ceased issuing LIBOR-based products and transitioned to Alternative Rates.

For the tenors of U.S.

dollar LIBOR utilized by the Company, the administrator of LIBOR extended publication until June 30, 2023, which was the cessation date.

The Company has transitioned all of its previously existing LIBOR-based products.

For products which were not expected to mature or settle prior to the cessation date, the Company reviewed and updated contract language as necessary to automatically convert to an Alternative Rate at their next rate reset date with no action required.

Regulatory Matters

The Company is subject to regulation by the Board of Governors of the Federal Reserve System (the “FRB”) and the Bank is primarily subject to regulation and supervision by the Office of the Comptroller of the Currency (the “OCC”) and the Consumer Financial Protection Bureau (the “CFPB”).

The Company and the Bank are required by applicable regulations to maintain minimum levels of regulatory capital.

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Total consideration paid was $ 7.1 million and goodwill from the transaction amounted to $ 5.8 million.

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.

The excess of consideration paid over the estimated fair value of the net assets acquired, excluding the net assets attributable to the non-controlling interest, has been recorded as goodwill.

The Company consolidated Trident’s assets, liabilities and components of comprehensive income within its consolidated results.

8 unchanged sentences

Cash and cash equivalents $ 45,693

Other current assets 238

Premises and equipment 18

ROU asset 779

Other assets 81

Other current and non-current assets 1,116

Total assets acquired 46,809

6 unchanged sentences

Goodwill recorded $ 5,827

The calculation of goodwill is subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties become available.

The Company finalized its review of the acquired assets and liabilities and will not be recording any further adjustments to the carrying value.

The calculation of goodwill was subject to change for up to one year after the date of acquisition as additional information relative to the closing date estimates and uncertainties became available, and was finalized as of December 31, 2022.

Merger Related Expenses

The Company incurred merger related expenses of $ 2.7 million, $ 1.5 million, and $ 15.9 million for the years ended December 31, 2022, 2021, and 2020, respectively.

The Company incurred merger related expenses of $ 22,000 , $ 2.7 million, and $ 1.5 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The following table summarizes the merger related expenses for the years ended December 31, 2023, 2022 and 2021:

8 unchanged sentences

Merger related expenses for 2022 included expenses related to the terminated merger agreement with Partners Bancorp.

Merger related expenses for 2021 and 2020 included expenses related to acquisitions of Two River and Country Bank, which were both completed on January 1, 2020.

Merger related expenses for 2021 included expenses related to acquisitions of Two River and Country Bank, which were both completed on January 1, 2020.

Core Deposit Intangibles

11 unchanged sentences

Asset-backed securities 295,796 — ( 4,252 ) 291,544 —

Agency commercial MBS 110,606 — ( 18,017 ) 92,589 —

Mortgage-backed securities:

Agency residential 298,107 183 ( 97 ) 298,193 —

Agency commercial 109,590 — ( 15,255 ) 94,335 —

Total mortgage-backed securities 407,697 183 ( 15,352 ) 392,528 —

Total debt securities available-for-sale $ 780,079 $ 194 $ ( 26,381 ) $ 753,892 $ —

Debt securities held-to-maturity:

State, municipal and sovereign debt obligations $ 260,249 $ 46 $ ( 24,940 ) $ 235,355 $ ( 60 )

State and municipal debt obligations $ 222,009 $ 251 $ ( 14,550 ) $ 207,710 $ ( 39 )

Corporate debt securities 69,809 391 ( 3,941 ) 66,259 ( 987 )

23 unchanged sentences

Total debt securities $ 1,725,671 $ 1,245 $ ( 159,227 ) $ 1,567,689 $ ( 1,128 )

(1) The amortized cost for held-to-maturity securities included net unrealized losses of $ 1.8 million and $ 2.3 million, at December 31, 2023 and 2022, respectively, related to securities transferred from available-for-sale to held-to-maturity in prior years.

These unrealized losses continue to be reflected within accumulated other comprehensive income, net of subsequent amortization, which is to be recognized over the life of the securities.

There was no allowance for securities credit losses on debt securities available-for-sale at December 31, 2023 and 2022.

1 unchanged sentence

For the Years Ended,

Allowance for credit losses

Allowance for securities credit losses

Beginning balance $ ( 1,128 ) $ ( 1,467 )

Credit loss benefit 339 248

(Provision) benefit for credit losses ( 5 ) 339

Total ending allowance balance $ ( 1,133 ) $ ( 1,128 )

5 unchanged sentences

As of December 31, 2023

State, municipal and sovereign debt obligations $ 260,249 $ — $ 260,249

State and municipal debt obligations $ 222,009 $ — $ 222,009

Corporate debt securities 55,737 14,072 69,809

1 unchanged sentence

Total debt securities held-to-maturity $ 298,430 $ 14,072 $ 312,502

During 2021 and 2013, the Bank transferred $ 12.7 million and $ 536.0 million, respectively, of previously designated available-for-sale securities to a held-to-maturity designation at estimated fair value.

The securities transferred had an unrealized net loss of $ 209,000 and $ 13.3 million at the time of transfer in 2021 and 2013, respectively, which continues to be reflected in accumulated other comprehensive loss on the Consolidated Statement of Financial Condition, net of subsequent amortization, which is being recognized over the life of the securities.

The carrying value of the debt securities held-to-maturity at December 31, 2022 and 2021 is as follows (in thousands):

Amortized cost $ 1,224,564 $ 1,143,548

Net loss on date of transfer from available-for-sale ( 13,556 ) ( 13,556 )

Allowance for securities credit losses ( 1,128 ) ( 1,467 )

Accretion of net unrealized loss on securities reclassified as held-to-maturity 11,258 10,668

Carrying value $ 1,221,138 $ 1,139,193

There were $ 108,000 of realized losses on debt securities for the year ended December 31, 2022.

There were no realized gains or losses on debt securities for the year ended December 31, 2021.

The realized gains/losses on debt securities is presented within other of the Consolidated Statement of Income.

There were $ 697,000 and $ 108,000 of realized losses on sale of debt securities available-for-sale for the years ended December 31, 2023 and December 31, 2022, respectively.

The realized gains/losses on debt securities is presented within Other under Total other income of the Consolidated Statements of Income.

The amortized cost and estimated fair value of debt securities at December 31, 2023 by contractual maturity are shown below (in thousands):

21 unchanged sentences

Asset-backed securities — — 291,544 ( 4,252 ) 291,544 ( 4,252 )

Agency commercial MBS 8,782 ( 1,675 ) 83,807 ( 16,342 ) 92,589 ( 18,017 )

Agency residential 169,000 ( 97 ) — — 169,000 ( 97 )

Agency commercial — — 94,335 ( 15,255 ) 94,335 ( 15,255 )

Total MBS 169,000 ( 97 ) 94,335 ( 15,255 ) 263,335 ( 15,352 )

Total debt securities available-for-sale 171,376 ( 264 ) 451,856 ( 26,117 ) 623,232 ( 26,381 )

Debt securities held-to-maturity:

State, municipal and sovereign debt obligations 133,492 ( 11,952 ) 97,135 ( 12,988 ) 230,627 ( 24,940 )

State and municipal debt obligations 6,671 ( 23 ) 191,511 ( 14,527 ) 198,182 ( 14,550 )

Corporate debt securities 3,084 ( 473 ) 58,386 ( 3,468 ) 61,470 ( 3,941 )

21 unchanged sentences

Total debt securities $ 669,487 $ ( 39,206 ) $ 812,090 $ ( 120,021 ) $ 1,481,577 $ ( 159,227 )

The Company concluded that debt securities were not impaired at December 31, 2022 based on a consideration of several factors.

The Company concluded that no debt securities were impaired at December 31, 2023 based on consideration of several factors.

The Company noted that each issuer made all the contractually due payments when required.

1 unchanged sentence

Based on management’s analysis of each individual security, the issuers appear to have the ability to meet debt service requirements over the life of the security.

Furthermore, the change in net unrealized losses were primarily due to changes in the general credit and interest rate environment and not credit quality.

Historically, the Company has not utilized securities sales as a source of liquidity and the Company’s liquidity plans include adequate sources of liquidity outside the securities portfolio.

Furthermore, the net unrealized losses were primarily due to changes in the general credit and interest rate environment and not credit

Additionally, the Company has not utilized securities sales as a source of liquidity and the Company’s liquidity plans include adequate sources of liquidity outside securities sales.

Equity Investments

At December 31, 2023 and 2022, the Company held equity investments of $ 100.2 million and $ 102.0 million, respectively.

The equity investments primarily comprised of select financial services institutions’ preferred and common stocks, investments in funds and other financial institutions.

The equity investments are primarily comprised of select financial services institutions’ preferred stocks, investments in other financial institutions and funds.

The realized and unrealized gains or losses on equity securities for the year ended December 31, 2023 and 2022 are shown in the table below (in thousands):

For the Year Ended December 31,

Net gain on equity investments $ 9,685 $ 7,145

Net gains recognized on equity investments sold 1,351 8,123

Unrealized gain (loss) recognized on equity investments still held $ 8,334 $ ( 978 )

2023 2022 2021

Net (loss) gain on equity investments $ ( 3,732 ) $ 9,685 $ 7,145

Net (losses) gains recognized on equity investments sold ( 5,462 ) 1,351 8,123

Unrealized gains (losses) recognized on equity investments still held $ 1,730 $ 8,334 $ ( 978 )

Loans Receivable, Net

3 unchanged sentences

Commercial and industrial 666,532 622,372

622,372 449,224

Total commercial 6,964,397 6,791,691

6 unchanged sentences

Total loans receivable, net $ 10,136,721 $ 9,868,718

(1) The commercial and industrial loans balance at December 31, 2022 and 2021 includes Paycheck Protection Program (“PPP”) loans of $ 1.6 million and $ 22.9 million, respectively.

The Company categorizes all loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as:

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(1) For residential real estate and other consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity.

An analysis of the allowance for credit losses on loans for the years ended December 31, 2022 and 2021 is as follows (in thousands):

An analysis of the allowance for credit losses on loans for the years ended December 31, 2023 and 2022 was as follows (in thousands):

Commercial Real Estate - Investor Commercial Real Estate - Owner Occupied Commercial

4 unchanged sentences

Balance at beginning of year $ 21,070 $ 4,423 $ 5,695 $ 24,530 $ 1,106 $ 56,824

Credit loss (benefit) expense ( 4,481 ) ( 1,569 ) 561 13,275 ( 152 ) 7,634

Provision (benefit) for credit losses 15,173 ( 77 ) 1,276 2,456 ( 133 ) 18,695

Charge-offs (1)

( 8,350 ) ( 6 ) ( 129 ) — ( 208 ) ( 8,693 )

Recoveries 6 14 25 43 223 311

3 unchanged sentences

Balance at beginning of year $ 25,504 $ 5,884 $ 5,039 $ 11,155 $ 1,268 $ 48,850

Credit loss benefit ( 974 ) ( 9,190 ) ( 321 ) ( 761 ) ( 1,100 ) ( 12,346 )

(Benefit) provision for credit losses ( 4,481 ) ( 1,569 ) 561 13,275 ( 152 ) 7,634

Charge-offs ( 8 ) ( 62 ) ( 60 ) ( 56 ) ( 387 ) ( 573 )

1 unchanged sentence

Balance at end of year $ 21,070 $ 4,423 $ 5,695 $ 24,530 $ 1,106 $ 56,824

(1) Gross charge-offs for the year ended December 31, 2023 of $ 8.7 million, primarily related to one commercial relationship, which was originated in 2019 and had a partial charge-off of $ 8.4 million.

The remainder of the current year gross charge-offs were related to loans that were originated in and prior to 2018.

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral and, therefore, is classified as non-accruing.

At December 31, 2023 and 2022, the Company had collateral dependent loans with an amortized cost balance as follows:

commercial real estate - investor of $ 4.6 million and $ 3.6 million, respectively;

commercial real estate - owner occupied of $ 4.0 million and $ 11.9 million, respectively;

and commercial and industrial of $ 160,000 and $ 277,000 , respectively.

In addition, the Company had residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, with an amortized cost balance of $ 858,000 and $ 438,000 at December 31, 2022 and 2021, respectively.

At December 31, 2022 and 2021, the amount of foreclosed residential real estate property held by the Company was $ 0 and $ 106,000 , respectively.

commercial real estate - investor of $ 15.2 million and $ 4.6 million, respectively, commercial real estate - owner occupied of $ 352,000 and $ 4.0 million, respectively, and commercial and industrial of $ 304,000 and $ 160,000 , respectively.

In addition, the Company had residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, with an amortized cost balance of $ 2.6 million and $ 858,000 at December 31, 2023 and 2022, respectively.

The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of December 31, 2023 and 2022 (in thousands):

Commercial real estate – investor (1)

$ 20,820 $ 10,483

Commercial real estate – owner occupied 351 4,025

2 unchanged sentences

Other consumer 2,531 2,457

Total non-accrual loans $ 23,265 $ 25,494

At December 31, 2022 and 2021, the non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans.

At December 31, 2022, there was one PPP loan for $ 14,000 that was past due greater than 90 days and still accruing interest.

$ 29,548 $ 23,265

(1) At December 31, 2023, non-performing loans included the remaining exposure of $ 8.8 million on a commercial real estate relationship that was partially charged-off during the year ended December 31, 2023.

At December 31, 2023 and 2022, non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans.

At December 31, 2023, there were no loans that were past due 90 days or greater and still accruing interest.

At December 31, 2022, there was one Paycheck Protection Program (“PPP”) loan for $ 14,000 that was past due 90 days or greater and still accrued interest, which subsequently became current.

Per SBA guidelines, the SBA will pay accrued interest through the deferral period up to a maximum of 120 days past due.

Given these servicing guidelines, PPP loans that are 90 to 120 days past due will be reported as accruing loans.

At December 31, 2021, there was one loan for $ 46,000 that was 90 days or greater past due and still accruing interest that was fully paid on January 14, 2022.

The following table presents the aging of the recorded investment in past due loans as of December 31, 2023 and 2022 by loan portfolio segment (in thousands):

6 unchanged sentences

Commercial real estate – investor (1)

$ 978 $ 684 $ 15,201 $ 16,863 $ 5,337,111 $ 5,353,974

Commercial real estate – owner occupied 335 352 293 980 942,911 943,891

10 unchanged sentences

$ 8,095 $ 6,052 $ 11,581 $ 25,728 $ 9,892,326 $ 9,918,054

The Company classifies certain loans as TDRs when credit terms to a borrower in financial difficulty are modified.

The modifications may include a reduction in rate, an extension in term, the capitalization of past due amounts, and/or the restructuring of scheduled principal payments.

Residential real estate and consumer loans where the borrower’s debt is discharged in a bankruptcy filing are also considered TDR loans.

For these loans, the Bank retains its security interest in the real estate collateral.

(1) At December 31, 2023, 90 days or greater past due loans included the remaining exposure of $ 8.8 million on a commercial real estate relationship that was partially charged-off during the year ended December 31, 2023.

The Company adopted ASU 2022-02 on January 1, 2023.

Since adoption, the Company has modified certain loans to borrowers experiencing financial difficulty.

These modifications may include a reduction in interest rate, an extension in term, principal forgiveness and/or other than insignificant payment delay.

At December 31, 2023, loans with modifications to borrowers experiencing financial difficulty totaled $ 8.9 million related to term extensions and interest rate reductions, which included one commercial real estate - investor relationship of $ 7.8 million, residential real estate loans of $ 715,000 and other consumer loans of $ 471,000 .

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table provides the performance of loans as of December 31, 2023, which have been modified since adoption (dollars in thousands):

Payment Status

Current 60 - 89 Days Past Due 90 Days or Greater past Due

Commercial real estate – investor $ 7,759 $ — $ —

Residential real estate 419 156 140

Other consumer 471 — —

$ 8,649 $ 156 $ 140

Prior to the adoption of ASU 2022-02, the Company classified certain loans as TDR loans when credit terms to a borrower in financial difficulty were modified in accordance with ASC 310-40.

Since adoption of this ASU, the Company has ceased to recognize or measure for new TDRs but those existing at December 31, 2022 remain until settled.

At December 31, 2023 and 2022, TDR loans totaled $ 12.8 million and $ 13.9 million, respectively.

At December 31, 2023 and 2022, there were $ 5.7 million and $ 6.4 million, respectively, of TDR loans included in the non-accrual loan totals.

At December 31, 2022, the Company had a $ 590,000 specific reserve allocated to a loan that was classified as a TDR loan.

At December 31, 2021, the Company had no specific reserves allocated to loans that were classified as TDRs.

Non-accrual loans which become TDRs are generally returned to accrual status after six months of performance.

At December 31, 2023 and 2022, the Company had a $ 282,000 and $ 590,000 , respectively, of specific reserve allocated to one loan that was classified as a TDR loan.

Non-accrual loans which become TDR loans are generally returned to accrual status after six months of performance.

In addition to the TDR loans included in non-accrual loans, the Company also has TDR loans classified as accruing loans, which totaled $ 7.1 million and $ 7.5 million at December 31, 2023 and 2022, respectively.

The following table presents information about TDRs which occurred during the years ended December 31, 2022 and 2021 (dollars in thousands):

The following table presents information about TDR loans which occurred during the year ended December 31, 2022 (dollars in thousands):

of Loans Pre-modification

5 unchanged sentences

Other consumer 8 1,237 1,378

For the Year Ended December 31, 2021

Troubled debt restructurings:

Commercial real estate – investor 1 $ 4,903 $ 4,903

Commercial real estate – owner occupied 2 6,406 6,423

Residential real estate 3 244 336

Other consumer 3 39 49

There were no TDR loans that defaulted during the year ended December 31, 2023, which were modified within the preceding year.

There was one TDR consumer loan and one TDR commercial real estate - investor loan for $ 15,000 and $ 923,000 , respectively, that defaulted during the year ended December 31, 2021 which were modified within the preceding year.

The TDR consumer loan is no longer in default as of December 31, 2022 and the TDR commercial real estate - investor loan was subsequently paid in full as of June 30, 2022.

Interest and Dividends Receivable

4 unchanged sentences

Total interest and dividends receivable $ 51,874 $ 44,704

(1) Dividend income is included within equity investments and other on the Consolidated Statements of Income.

Premises and Equipment, Net

6 unchanged sentences

Finance lease 3,339 3,189

Other 3,286 2,559

Total 205,790 202,428

1 unchanged sentence

Total premises and equipment, net $ 121,372 $ 126,705

(1) 2021 included assets under construction of $ 36.2 million related to the expansion of the Company’s headquarters in Toms River, New Jersey, which was completed in 2022.

In 2022, the Company’s headquarters in Toms River was classified within buildings and improvements.

Depreciation and amortization expense for the years ended December 31, 2022, 2021, and 2020 amounted to $ 11.5 million, $ 9.4 million, and $ 8.5 million, respectively.

Depreciation and amortization expense is presented within occupancy, equipment, and data processing expenses of the Consolidated Statement of Income.

Depreciation and amortization expense amounted to $ 11.5 million for both years ended December 31, 2023 and 2022, while it amounted to $ 9.4 million for the year ended December 31, 2021.

Depreciation and amortization expense is presented within occupancy, equipment, and data processing expenses of the Consolidated Statements of Income.

The major types of deposits at December 31, 2023 and 2022 were as follows (dollars in thousands):

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Total deposits $ 10,434,949 2.21 % $ 9,675,206 0.60 %

Accrued interest payable related to deposits was $ 2.0 million and $ 244,000 at December 31, 2022 and 2021, respectively.

Accrued interest payable related to deposits was $ 14.5 million and $ 2.0 million at December 31, 2023 and 2022, respectively.

Time deposits included $ 412.0 million and $ 117.7 million in deposits of $250,000 or more at December 31, 2023 and 2022, respectively.

5 unchanged sentences

Total $ 2,445,422

Interest expense on deposits for the years ended December 31, 2022, 2021 and 2020 was as follows (in thousands):

Interest expense on deposits for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):

For the Year Ended December 31,

13 unchanged sentences

Total borrowed funds $ 1,118,240 5.04 % $ 1,475,666 4.55 %

In March 2022, the Company redeemed $ 35.0 million of subordinated debt due September 30, 2026, which was reported in Other borrowings.

The debt carried an interest rate of 4.14 % based on a floating rate of three months LIBOR plus 392 basis points.

The Company pledges certain securities and loans to secure various borrowings or borrowing capacity.

The estimated fair value of securities pledged for the ability to draw on FHLB advances, access to the Federal Reserve discount window, and other borrowings and for other purposes required by law amounted to $ 935.4 million and $ 1.14 billion at December 31, 2022 and 2021, respectively, which included $ 105.3 million and $ 142.9 million at December 31, 2022 and 2021, respectively, pledged as collateral for securities sold under agreements to repurchase with customers.

The securities pledged, which collateralize the repurchase agreements are delivered to the lender, with whom each transaction is executed, or to a third-party custodian.

The lender, who may sell, loan or otherwise dispose of such securities to other parties in the normal course of their operations, agrees to resell to the Company substantially the same securities at the maturity of the repurchase agreements.

The Company also pledges eligible mortgage loans to secure FHLB and Federal Reserve System (“FRB”) advances.

At December 31, 2022, the Bank pledged $ 6.49 billion of eligible mortgage loans to secure FHLB and FRB advances.

The Company had no FHLB overnight advances and no borrowings from the FRB Discount Window or Bank Term Funding Program at December 31, 2023 and December 31, 2022.

FHLB advances and repurchase agreements had contractual maturities at December 31, 2023 as follows (in thousands):

2 unchanged sentences

2024 $ 244,390 $ 73,148

2025 204,246 —

2026 200,000 —

2027 200,000 —

Total $ 848,636 $ 73,148

2 unchanged sentences

Subordinated debt $ 125,000 $ 124,135 5.701 % (1)

Trust preferred 10,000 8,123 3 month LIBOR plus 225 basis points

Trust preferred 10,000 8,273 3 month SOFR plus 2.51 %

December 15, 2034

Trust preferred 30,000 23,589 3 month LIBOR plus 135 basis points

Trust preferred 30,000 23,936 3 month SOFR plus 1.61 %

March 15, 2036

Trust preferred 5,000 5,000 3 month LIBOR plus 165 basis points

Trust preferred 5,000 5,000 3 month SOFR plus 1.91 %

August 1, 2036

Trust preferred 7,500 7,500 3 month LIBOR plus 166 basis points

Trust preferred 7,500 7,500 3 month SOFR plus 1.92 %

November 1, 2036

Trust preferred 10,000 7,922 3 month LIBOR plus 153 basis points

Trust preferred 10,000 8,023 3 month SOFR plus 1.79 %

June 30, 2037

Trust preferred 10,000 10,000 3 month LIBOR plus 175 basis points

Trust preferred 10,000 10,000 3 month SOFR plus 2.01 %

September 1, 2037

Trust preferred 10,000 7,798 3 month LIBOR plus 139 basis points

Trust preferred 10,000 7,904 3 month SOFR plus 1.65 %

October 1, 2037

1 unchanged sentence

Total $ 209,185 $ 196,456

(1) Adjusts to a floating rate of 509.5 basis points over 3 month Secured Overnight Financing Rate (“SOFR”) on May 15, 2025.

(2) All trust preferred debt carry interest rates which adjust to a spread over LIBOR on a quarterly basis and are expected to convert to a spread over the SOFR upon LIBOR cessation.

(1) Adjusts to a floating rate of 5.095 % over 3 month Secured Overnight Financing Rate (“SOFR”) on May 15, 2025.

(2) All trust preferred debts carry interest rates which adjust to a spread over SOFR.

The 3-month tenor increased 0.26 % related to the conversion from LIBOR to SOFR.

All of the trust preferred debt is currently callable.

6 unchanged sentences

Total interest expense on borrowings $ 66,225 $ 22,677 $ 11,544

Pledged assets

The following table presents the assets pledged to secure borrowings, borrowing capacity, repurchase agreements, letters of credit, and for other purposes required by law at carrying value (in thousands):

Loans Debt Securities Total

December 31, 2023

FHLB and FRB $ 7,255,671 $ 1,051,558 $ 8,307,229

Repurchase agreements — 103,416 103,416

Total pledged assets $ 7,255,671 $ 1,154,974 $ 8,410,645

December 31, 2022

FHLB and FRB $ 6,487,980 $ 830,057 $ 7,318,037

Repurchase agreements — 105,294 105,294

Total pledged assets $ 6,487,980 $ 935,351 $ 7,423,331

The securities pledged, which collateralize the repurchase agreements are delivered to the lender, with whom each transaction is executed, or to a third-party custodian.

The provision for income taxes for the years ended December 31, 2023, 2022 and 2021 consisted of the following (in thousands):

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Total provision for income taxes $ 32,700 $ 46,565 $ 32,165

Included in other comprehensive income was the income tax impact attributable to the unrealized gain/loss on debt securities and accretion of unrealized losses on debt securities reclassified to held-to-maturity arising during the year in the amount of $ 10.4 million, $ 870,000 , and $ 721,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

Included in other comprehensive income was the income tax impact attributable to the unrealized gain/loss on debt securities, accretion of unrealized losses on debt securities reclassified to held-to-maturity, unrealized loss on derivative hedges and the related reclassification adjustments included in net income.

These items resulted in a tax expense of $ 4.9 million for the year ended December 31, 2023 and a tax benefit of $ 10.4 million a nd $ 870,000 for the years ended December 31, 2022 and 2021 , respectively.

The income tax provision reconciled to the income taxes that would have been computed at the statutory federal rate for the years ended December 31, 2023, 2022 and 2021 is as follows (dollars in thousands):

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Net operating loss carryforwards related to acquisition 21,077 23,100

Other, net 3,031 1,867

Section 174 Capitalized Costs 3,737 2,348

Federal and state alternative minimum tax 1,196 2,294

Other, net 653 683

Total gross deferred tax assets 60,477 66,938

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Deferred loan and commitment costs, net ( 2,317 ) ( 1,937 )

Purchase accounting adjustments ( 2,300 ) ( 2,056 )

Purchase accounting related adjustments ( 1,716 ) ( 2,300 )

Investments, discount accretion ( 73 ) ( 365 )

1 unchanged sentence

Net deferred tax assets $ 48,094 $ 55,819

The Co mpany has federal net operating losses from the acquisitions of Colonial American Bank (“Colonial American”) and Sun Bancorp, Inc.

The Company has federal net operating losses from the acquisitions of Colonial American Bank (“Colonial American”) and Sun Bancorp, Inc.

At December 31, 2023 and 2022, the net operating losses from Colonial American were $ 3.6 million and $ 3.9 million, respectively.

These net operating losses are subject to annual limitation under Code Section 382 of approximately $ 330,000 , and will expire between 2029 and 2034.

At December 31, 2022 and 2021, the net operating losses

from Sun were $ 106.1 million and $ 129.4 million, respectively.

These net operating losses are subject to annual limitation under Code Section 382 of approximately $ 23.3 million through 2022 and $ 9.3 million thereafter.

At December 31, 2023 and 2022, the net operating losses from Sun were $ 96.8 million and $ 106.1 million, respectively.

These net operating losses are subject to annual limitation under Code Section 382 of approximately $ 9.3 million.

These net operating losses will expire between 2029 and 2036.

At both December 31, 2022 and 2021, the Company had $ 2.3 million of Alternative Minimum Tax (“ AMT”) Tax Credits that were part of the Sun acquisition.

These credits are subject to the same Code Section 382 limitation as indic ated above but do not expire.

At December 31, 2022, 2021 and 2020, the Company determi ned that it is not required to establish a valuation reserve for the remaining net deferred tax assets since it is “more likely than not” that the net deferred tax assets will be realized through future reversals of existing taxable temporary differences, future taxable income and tax planning strategies.

At both December 31, 2023 and 2022, the Company had $ 1.2 million and $ 2.3 million, respectively, of Alternative Minimum Tax tax credits that were part of the Sun acquisition.

These credits are subject to the same Code Section 382 limitation as indicated above but do not expire.

At December 31, 2023, 2022 and 2021, the Company determined that it is not required to establish a valuation reserve for the remaining net deferred tax assets since it is “more likely than not” that the net deferred tax assets will be realized through future reversals of existing taxable temporary differences, future taxable income and tax planning strategies.

The conclusion that it is “more likely than not” that the remaining net deferred tax assets will be realized is based on the history of earnings and the prospects for continued growth.

Management will continue to review the tax criteria related to the recognition of deferred tax assets.

Retained earnings at December 31, 2022 included approximately $ 10.8 million for which no deferred income tax liability has been recognized.

Retai ned earnings at December 31, 2023 included approximately $ 10.8 million for which no deferred income tax liability has been recognized.

This amount represents an allocation of income to bad debt deductions for tax purposes only for tax years prior to 1988.

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However, such examinations may result in challenges to the tax return treatment applied by the Company to specific transactions.

The Company is currently under examination by the New Jersey Department of Taxation in connection with the 2014 to 2017 tax years.

The Company is currently under examination by the New York State Department of Taxation and Finance in connection with the 2019 to 2021 tax years.

As of December 31, 2023, the Company has not received any notices of proposed adjustments from this audit.

The Company also received notification of an upcoming examination by the New York State Department of Taxation and Finance in connection with the 2019 to 2021 tax years.

The tax years that remain subject to examination by the federal government and most state or city tax authorities include the tax years 2020 and forward.

Excluding the above, the tax years that remain subject to examination by New Jersey are 2018 and forward.

With the enactment of the Tax Reform on December 22, 2017, the federal corporate income tax rate was reduced from 35% to 21% effective January 1, 2018.

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ESOP participants are entitled to receive distributions from the ESOP account only upon termination of service, which includes retirement and death, except that a participant may elect to have dividends distributed as a cash payment on a quarterly basis.

The ESOP originally borrowed $ 13.4 million from the Company to purchase 2,013,137 shares of common stock.

In 1998, the initial loan agreement was amended to allow the ESOP to borrow an additional $ 8.2 million in order to fund the purchase of 633,750 shares of common stock.

At the same time, the term of the loan was extended from the initial 12 years to 30 years.

In 2018, the loan agreement was amended (“amended loan”) to allow the ESOP to borrow an additional $ 8.4 million in order to

fund the purchase of 292,592 shares of common stock.

At the same time, the fixed interest rate of the loan was reduced from 8.25 % to 3.25 %.

On November 9, 2021, the ESOP borrowed an additional $ 3.2 million from the Company to fund the purchase of 145,693 shares of common stock (“2021 loan”), and the loan had a fixed interest rate of 0.22 % that matures on December 31, 2023.

Both the amended loan and 2021 loan are to be repaid from contributions by the Bank to the ESOP trustee.

Over the years, the ESOP has borrowed from the Company to purchase shares of common stock.

During 2023, the ESOP had two outstanding loan agreements with the Bank (“the 2018 loan” and “the 2021 loan”).

The 2018 loan originally allowed the ESOP to borrow an additional $ 8.4 million from the Company at a fixed interest rate of 3.25 %, which matures on December 31, 2026, to purchase 292,592 shares of common stock.

The 2021 loan originally allowed the ESOP to borrow an additional $ 3.2 million from the Company at a fixed interest rate of 0.22 % to purchase 145,693 shares of common stock, which matured on December 31, 2023.

Both loans are to be repaid from contributions by the Bank to the ESOP trustee.

The Bank is required to make contributions to the ESOP in amounts at least equal to the principal and interest requirement of both debts.

The Bank’s obligation to make such contributions is reduce d to the extent of any dividends paid by the Company on unallocated shares and any investment earnings realized on such dividends.

As of December 31, 2022 and 2021, contributions to the ESOP, which were used to fund principal and interest payments on the ESOP loans, totaled $ 2.7 million and $ 2.3 million, respectively.

As of December 31, 2023 and 2022, contributions to the ESOP, which were used to fund principal and interest payments on the ESOP loans, both totaled $ 2.7 million .

During 2023 and 2022, $ 254,000 and $ 245,000 , respectively, of dividends paid on unallocated ESOP shares were used for debt service.

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The unamortized balance of the ESOP is shown as unallocated common stock held by the ESOP and is reflected as a reduction of stockholders’ equity.

For the year ended December 31, 2023, the Bank recorded compensation expense related to the ESOP of $ 2.1 million which included $ 341,000 related to a decrease in compensation expense to reflect the decrease in the average fair value of shares committed to be released and allocated shares below the Bank’s cost.

For the years ended December 31, 2022, and 2021, the Bank recorded compensation expense related to the ESOP of $ 2.5 million and $ 2.2 million, respectively, which included $ 82,000 and $ 179,000 , respectively, of additional compensation expense to reflect the increase in the average fair value of shares committed to be released and allocated shares in excess of the Bank’s cost.

For the year ended December 31, 2020, the Bank recorded compensation expense related to the ESOP of $ 1.1 million including $ 80,000 related to a decrease in compensation expense to reflect the decrease in the average fair value of shares committed to be released and allocated shares below the Bank’s cost.

As of December 31, 2023, 2,765,724 shares had been allocated to participants and 119,755 shares were committed to be released for services rendered in 2023.

Incentive Plans

Long-Term Incentive Plans

The Company offers long-term incentive plans that provide for the granting of stock awards (both time-vested and performance-based) and stock options, as well as phantom stock units.

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2011 Plan (1)

4,000,000 1,600,000 248,013 99,205

Total 10,950,000 4,380,000 4,070,746 1,628,298

The Company grants time-based and performance-based stock awards.

(1) The 2011 Stock Incentive Plan expired and the Company will not issue any further shares from this plan.

The Company grants time-based and performance-based restricted stock awards.

Time-based awards vest ratably, and generally have a three - to five- year vesting period.

Performance-based stock awards, which are granted to certain senior executives, vest based on the estimated probability of achievement of defined tiered performance goals or include market-based conditions.

performance goals for each metric are aligned with corresponding tiered vesting values and have been set using financial data from the applicable strategic plan as approved by the Board.

Tiered performance goals for each metric are aligned with corresponding tiered vesting values and have been set using financial data from the applicable strategic plan as approved by the Board.

The Company granted performance-based stock awards in 2023, 2022 and 2021.

The 2022 performance-based stock awards were issued with a three year cliff vesting schedule and the 2021 and 2020 performance-based stock awards vest in equal amounts over a four - to five-year period.

The 2022 performance-based stock awards include market-based condition awards.

The fair value of these awards were estimated through the use of the Monte Carlo valuation model applying the following assumptions:

The 2023 and 2022 performance-based stock awards were issued with a three year cliff vesting schedule and the 2021 performance-based stock awards vest in equal amounts over a four year period.

The 2023 and 2022 performance-based stock awards include a market-based condition.

The fair value of these awards were estimated through the use of the Monte Carlo valuation model at the time of grant, applying the following assumptions:

Risk-free interest rate 4.56 % 1.36 %

Expected performance period 2.9 years

Expected performance period 2.8 years 2.9 years

Expected volatility 35.80 % 41.10 %

The risk-free interest rate is based on the U.S Treasury rate, at valuation date, with a term equal to the expected performance period.

The risk-free interest rate is based on the U.S Treasury rate, with a term equal to the expected performance period.

The expected performance period reflects the remaining term of the awards’ performance period.

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The Company typically issues treasury shares or authorized but unissued shares to satisfy stock option exercises.

The Company did not grant stock options for the years ended December 31, 2022 and 2021.

The fair value of stock options granted in 2020 was estimated through the use of the Black-Scholes option pricing model applying the following assumptions:

Risk-free interest rate 1.03 %

Expected option life 7 years

Expected volatility 23 %

Expected dividend yield 3.33 %

Weighted average fair value of an option share granted during the year $ 2.93

Intrinsic value of options exercised during the year (in thousands) 2,499

The risk-free interest rate is based on the U.S.

Treasury rate with a term equal to the expected option life.

The expected option life conforms to the Company’s actual experience.

Expected volatility is based on actual historical results.

The Company did not grant stock options for the years ended December 31, 2023, 2022 or 2021, and has not granted stock options since 2020.

A summary of option activity for the years ended December 31, 2023, 2022 and 2021 is as follows:

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Outstanding at beginning of year 2,210,684 $ 21.66 2,458,255 $ 21.02 2,838,867 $ 20.67

Granted — — — — 699,651 20.44

Exercised ( 195,684 ) 14.59 ( 217,038 ) 14.17 ( 264,717 ) 14.80

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1,969,439 3.9 years $ 22.42 1,663,506 3.5 years $ 22.58

The aggregate intrinsic value for stock options outstanding and stock options exercisable at December 31, 2022 was $ 3.7 million and $ 3.4 million, respectively.

The aggregate intrinsic value for both stock options outstanding and stock options exercisable at December 31, 2023 was $ 57,000 .

Phantom Stock Units

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The phantom stock units are liability-classified time-based awards, which vest ratably over a three - to five- year period.

The fair value is determined based on the Company’s stock price at the grant date and remeasured quarterly.

The fair value is determined based on the Company’s stock price at the grant date and remeasured monthly.

The phantom stock units are settled in cash when they vest.

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The Company, in the normal course of business, is party to financial instruments and commitments which involve, to varying degrees, elements of risk in excess of the amounts recognized in the consolidated financial statements.

These financial

instruments and commitments include unused consumer lines of credit, construction loan lines of credit, commercial lines of credit, and commitments to extend credit.

These financial instruments and commitments include unused consumer lines of credit, construction loan lines of credit, commercial lines of credit, and commitments to extend credit.

At December 31, 2023, the following commitments and contingent liabilities existed which are not reflected in the accompanying consolidated financial statements (in thousands):

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Floating-rate 119,941

The Company’s fixed-rate loan commitments expire within 90 days of issuance and carried interest rates ranging from 4.50 % to 9.50 % at December 31, 2022.

The Company’s fixed-rate loan commitments generally expire within 90 days of issuance and carried interest rates ranging from 5.50 % to 10.50 % at December 31, 2023.

At December 31, 2023, the Company had $ 2.1 million of unfunded capital commitments related to investment funds.

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Substantially all of the unused consumer and construction loan lines of credit are collateralized by mortgages on real estate.

At December 31, 2022, the Company is obligated under noncancelable operating leases for premises and equipment.

Rental and lease expense under these leases were $ 6.3 million, $ 7.2 million, and $ 7.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

At December 31, 2023, the Company is obligated under noncancelable operating leases and rental agreements for premises and equipment.

Rental and lease expense under these leases were $ 5.7 million, $ 6.3 million, and $ 7.2 million for the years ended

December 31, 2023, 2022 and 2021, respectively.

Refer to Note 17 Leases for the projected minimum lease commitments as of December 31, 2023.

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Earnings Per Share

The following reconciles average shares outstanding for basic and diluted earnings per share for the years ended December 31, 2022, 2021 and 2020 (in thousands):

The following reconciles shares outstanding for basic and diluted earnings per share for the years ended December 31, 2023, 2022 and 2021 (in thousands):

2023 2022 2021

6 unchanged sentences

Average diluted shares outstanding 58,957 58,878 59,649

For the years ended December 31, 2022, 2021 and 2020, antidilutive stock options of 1,544,000 , 1,566,000 , and 2,242,000 , respectively, were excluded from the earnings per share calculations.

For the years ended December 31, 2023, 2022 and 2021, antidilutive stock options of 1,775,000 , 1,544,000 , and 1,566,000 , respectively, were excluded from the earnings per share calculation.

Fair Value Measurements

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Certain financial assets and financial liabilities are measured at fair value on a non-recurring basis, that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Debt Secur ities Available-for-Sale

Debt Securities Available-for-Sale

Debt securities classified as available-for-sale are reported at fair value.

Fair value for these debt securities is determined using inputs other than quoted prices that are based on market observable information (Level 2 ).

Level 2 debt securities are priced through third-party pricing services or s ecurity industry sources that actively participate in the buying and selling of securities.

Fair value of U.S.

Treasuries are determined using quoted prices in active markets (Level 1).

The majority of the other debt securities are determined using inputs other than quoted prices that are based on market observable information (Level 2).

Level 2 debt securities are priced through third-party pricing services or security industry sources that actively participate in the buying and selling of securities.

Prices obtained from these sources include market quotations and matrix pricing.

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Fair value for these investments is primarily determined using a quoted price in an active market or exchange (Level 1) or using inputs other than quoted prices that are based on market observable information (Level 2).

Fair value for certain securities, including convertible preferred stock, was determined using broker or dealer quotes with limited levels of activity and price transparency (Level 3).

alternative).

Certain equity investments without readily determinable fair values are measured at net asset value (“NAV”) per share as a practical expedient, which are excluded from the fair value hierarchy levels in the table below.

Certain equity investments without readily

determinable fair values are measured at NAV per share as a practical expedient, which are excluded from the fair value hierarchy levels in the table below.

Interest Rate Derivatives

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When entering into an interest rate swap or cap contract, the Company is exposed to fair value changes due to interest rate movements, and also the potential nonperformance of the contract counterparty.

Other Real Estate Owned and Loans Individually Measured for Impairment

Other real estate owned and loans measured for impairment based on the fair value of the underlying collateral are recorded at estimated fair value, less estimated selling costs.

Fair value is based on independent appraisals (Level 3).

Loans Individually Measured for Impairment

Loans measured for impairment based on the fair value of the underlying collateral are recorded at estimated fair value, less estimated selling costs.

Fair value is generally based on independent appraisals (Level 3), which may be adjusted by management for qualitative factors, such as economic factors and estimated liquidation expenses.

The following table summarizes financial assets and financial liabilities measured at fair value as of December 31, 2023 and 2022, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):

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Equity investments 53,166 — 53,166 —

Interest rate derivative assets 113,420 — 113,420 —

Interest rate derivative asset 87,776 — 87,776 —

Interest rate derivative liability ( 87,848 ) — ( 87,848 ) —

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Equity investments 61,942 430 61,511 —

Interest rate derivative assets 22,787 — 22,787 —

Interest rate derivative asset 113,420 — 113,420 —

Interest rate derivative liability ( 113,473 ) — ( 113,473 ) —

1 unchanged sentence

Equity investments (1) (2)

Other real estate owned 106 — — 106

40,095 — — 37,076

Loans measured for impairment based on the fair value of the underlying collateral (3)

9,635 — — 9,635

(1) Primarily consists of $ 37.1 million of equity investments measured under the measurement alternative, which included $ 20.0 million of unrealized gains as a result of observable price changes in the investments for the year ended December 31, 2022.

(2) Equity investments of $ 40.1 million includes $ 3.0 million of certain equity investment funds measured at NAV per share (or its equivalent) as a practical expedient to fair value and these equity investments have not been classified in the fair value hierarchy levels.

(1) As of December 31, 2023 and 2022, equity investments of $ 47.0 million and $ 40.1 million, respectively, included $ 43.6 million and $ 37.1 million, respectively, of equity investments measured under the measurement alternative.

This included no unrealized gains or losses for the year ended December 31, 2023 and $ 20.0 million of unrealized gains for the year ended December 31, 2022.

(2) As of December 31, 2023 and 2022, equity investments of $ 47.0 million and $ 40.1 million, respectively, included $ 3.4 million and $ 3.0 million, respectively, of certain equity investment funds measured at NAV per share (or its equivalent) as a practical expedient to fair value and these equity investments have not been classified in the fair value hierarchy levels.

(3) Primarily consists of commercial loans, which are collateral dependent.

The amounts are based on independent appraisals, which may be adjusted by management for qualitative factors, such as economic factors and estimated liquidation expenses.

The range may vary but is generally 0 % to 8 % on the discount for costs to sell and 0 % to 10 % on appraisal adjustments.

The following table reconciles, for the year ended December 31, 2022 and 2021, the beginning and ending balances for equity investments that are recognized at fair value on a recurring basis, in the Consolidated Statements of Financial Condition, using significant unobservable inputs (in thousands):

The following table reconciles the beginning and ending balances for equity investments that are recognized at fair value on a recurring basis, in the Consolidated Statements of Financial Condition, using significant unobservable inputs (in thousands):

For the Year Ended December 31,

December 31, 2022

Beginning balance $ 2,718

Total gains included in earnings — 178

Transfers out of Level 3 ( 2,718 )

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The Company recognizes transfers between levels of the valuation hierarchy at the end of the applicable reporting periods.

There were no assets in Level 3 that were recognized at fair value on a recurring basis or transfers into or out of Level 3 for the year ended December 31, 2023.

During the year ended December 31, 2022, the Company executed its right to convert $ 2.7 million of preferred stock into common stock, which resulted in a transfer from Level 3 into Level 1.

There were no transfers into or out of Level 3 assets or liabilities in the fair value hierarchy for the year ended December 31, 2021.

Assets and Liabilities Disclosed at Fair Value

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Management reviews this documentation, makes inquiries of the third-party pricing service and decides as to the level of the valuation inputs.

Based on the Company’s review of the available documentation from the third-party pricing service, management concluded that Level 2 inputs were utilized for all securities except for certain state and municipal obligations, known as bond anticipation notes, as well as certain debt securities where management utilized Level 3 inputs, such as broker or dealer quotes with limited levels of activity and price transparency.

Based on the Company’s review of the available documentation from the third-party pricing service, management concluded that Level 2 inputs were utilized for all securities except for certain debt securities where management utilized Level 3 inputs, such as broker or dealer quotes with limited levels of activity and price transparency.

Restricted Equity Investments

The fair value for Federal Home Loan Bank of New York, Federal Reserve Bank stock, and Atlantic Community Bankers Bank is its carrying value since this is the amount for which it could be redeemed.

The fair value of these investments, which are primarily Federal Home Loan Bank of New York and Federal Reserve Bank stock, is its carrying value since this is the amount for which it could be redeemed.

There is no active market for this stock and the Company is required to maintain a minimum investment as stipulated by the respective entities.

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Each loan category is further segmented into fixed and adjustable rate interest terms.

Fair value of performing and non-performing loans was estimated by discounting the future cash flows, net of estimated prepayments, at a rate for which similar loans would be originated to new borrowers with similar terms.

The fair value of loans was measured using the exit price notion.

Fair value of performing and non-performing loans, which is based on an exit price notion, was estimated by discounting the future cash flows, net of estimated prepayments, at market discount rates that reflect the credit and interest rate risk inherent in the loan.

Loans held for sale are carried at the lower of unpaid principal balance, net, or estimated fair value on an aggregate basis.

Estimated fair value is generally determined based on bid quotations from secondary markets.

Deposits Other than Time Deposits

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1,542,020 — 1,504,601 —

Other borrowings 229,141 — 251,491 —

FHLB advances and other borrowings 1,406,569 — 1,416,384 —

Securities sold under agreements to repurchase with customers 69,097 69,097 — —

(1) The estimated fair value of non-maturity deposits does not consider any inherent value and represents the amount payable on demand.

However, non-maturity deposits do contain significant inherent value to the Company, particularly when overnight funding costs are greater than the deposit costs.

Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.

These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.

Because a limited market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience,

current economic conditions, risk characteristics of various financial instruments and other significant unobservable inputs.

These estimates do not reflect any premium or discount that could result from offering for sale at one time

the Company’s entire holdings of a particular financial instrument.

Because a limited market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments and other significant unobservable inputs.

These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.

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however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC Topic 820, Fair Value Measurements.

The Company recognized gains of $ 49,000 , $ 72,000 , and $ 428,000 in commercial loan swap income resulting from fair value adjustments for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company recognized losses of $ 5,000 and gains of $ 49,000 and $ 72,000 in commercial loan swap income resulting from fair value adjustments for the years ended December 31, 2023, 2022 and 2021, respectively.

Derivatives Designated as Hedging Instruments

For the year ended December 31, 2022, the Company entered into an interest rate swap intended to add stability to its net interest income and to manage its exposure to future interest rate movements associated with a pool of floating rate commercial loans.

During the fourth quarter of 2022, the Company entered into a three-year interest rate swap intended to add stability to its net interest income and to manage its exposure to future interest rate movements associated with a pool of floating rate commercial loans.

The swap requires the Company to pay variable-rate amounts indexed to one-month term SOFR to the counterparty in exchange for the receipt of fixed-rate amounts at 4.0 % from the counterparty.

The swap was designated and qualified as a cash flow hedge, under ASC Topic 815, Derivatives and Hedging.

The maximum length of time over which forecasted cash flows are hedged is approximately three years.

The effect on the Company’s accumulated other comprehensive income attributable to cash flow hedge derivative, net of tax, was a $ 25,000 loss for the year ended December 31, 2022 due to unrealized mark to market losses on the derivative.

There were no gains or losses recognized in income from the Company’s cash flow hedge for the year ended December 31, 2022.

The changes in the fair value of cash flow hedges are initially reported in other comprehensive income.

Amounts are subsequently reclassified from accumulated other comprehensive income to earnings when the hedged transactions occur, specifically within the same line item as the hedged item (interest income).

Therefore, a portion of the balance reported in accumulated other comprehensive income related to derivatives will be reclassified to interest income as interest payments are made or received on the Company’s interest rate swaps.

The table below presents the effect on the Company’s accumulated other comprehensive income/loss (“AOCI” or “AOCL”) attributable to the cash flow hedge derivative, net of tax, and the related gains/(losses) reclassified from AOCI into income (in thousands):

For the Year Ended December 31,

AOCL balance at beginning of period, net of tax $ ( 25 ) $ —

Unrealized losses recognized in OCI ( 808 ) ( 25 )

Losses reclassified from AOCI into interest income 797 —

AOCL balance at end of period, net of tax $ ( 36 ) $ ( 25 )

During the next twelve months ending December 31, 2024, the Company estimates that an additional $ 809,000 will be reclassified as a reduction to interest income.

The table below presents the notional amount and fair value of derivatives designated and not designated as hedging instruments, as well as their location on the Consolidated Statements of Financial Condition (in thousands):

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Interest rate swaps and cap contracts $ 1,368,245 $ 113,420 $ 113,440

Derivatives Designated as Cash Flow Hedge

Interest rate swaps contract 100,000 — 33

Total Derivatives $ 1,468,245 $ 113,420 $ 113,473

Credit Risk-Related Contingent Features

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This requirement is dependent on certain specified credit measures.

The amount of collateral posted with third parties was $ 40,000 and $ 19.8 million at December 31, 2022 and 2021, respectively.

The amount of collateral received from third parties was $ 104.5 million at December 31, 2022.

The amount of collateral posted with third parties was $ 0 and $ 40,000 at December 31, 2023 and 2022, respectively.

The amount of collateral received from third parties was $ 88.3 million and $ 104.5 million at December 31, 2023 and 2022, respectively.

The amount of collateral posted with third parties and received from third parties is deemed to be sufficient to collateralize both the fair market value change as well as any additional amounts that may be required as a result of a change in the specified credit measures.

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For the discount rate, ASC Topic 842, Leases requires the Company to use the rate implicit in the lease, provided the rate is readily determinable.

As this rate is rarely determinable, the Company utilizes its incremental borrowing rate, at lease inception, over a similar term.

As this rate is not readily determinable, the Company generally utilizes its incremental borrowing rate, at lease inception, over a similar term.

For operating leases existing prior to January 1, 2019, the Company used the incremental borrowing rate for the remaining lease term as of January 1, 2019.

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All other costs are included in occupancy expense on the Consolidated Statements of Income.

Future minimum payments for the finance lease and operating leases with initial or remaining terms of one year or more as of December 31, 2022 were as follows (in thousands):

Future minimum payments for the finance lease and operating leases with initial or remaining terms were as follows (in thousands):

Finance Lease Operating Leases

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The summarized financial information for the Company’s consolidated VIE consisted of the following (in thousands):

As of December 31, 2022

December 31, 2023 December 31, 2022

Cash and cash equivalents $ 22,151 $ 30,062

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Interest income – ESOP loan receivable

Net gain on equity investments 7,973 7,499 20,460

Net (loss) gain on equity investments ( 3,732 ) 7,973 7,499

98,657 84,160 50,156

4 unchanged sentences

Income before income taxes and undistributed earnings of subsidiaries 81,038 69,041 35,747

Benefit (provision) for income taxes 959 1,018 ( 2,901 )

Benefit for income taxes 3,807 959 1,018

Income before undistributed earnings of subsidiaries 84,845 70,000 36,765

10 unchanged sentences

Net income $ 104,065 $ 147,357 $ 110,076

Decrease (increase) in advances to subsidiary Bank 30,640 37,824 ( 73,426 )

(Increase) decrease in advances to subsidiary Bank ( 34,449 ) 30,640 37,824

Undistributed earnings of subsidiary Bank ( 19,220 ) ( 77,357 ) ( 73,311 )

Net gain on equity investments ( 7,973 ) ( 7,499 ) ( 20,460 )

Net loss (gain) on equity investments 3,732 ( 7,973 ) ( 7,499 )

Net premium amortization in excess of discount accretion on securities 981 1,185 755

2 unchanged sentences

Change in other assets and other liabilities ( 3,995 ) 2,336 7,359

Net cash provided by (used in) operating activities 97,420 76,570 ( 32,786 )

Net cash provided by operating activities 52,416 97,420 76,570

Cash flows from investing activities:

6 unchanged sentences

Cash flows from financing activities:

Net proceeds from issuance of subordinated notes — — 122,180

Repayments of other borrowings — ( 35,000 ) ( 7,500 )

1 unchanged sentence

Purchase of treasury stock — ( 7,396 ) ( 36,059 )

Net proceeds from the issuance of preferred stock — — 55,529

Exercise of stock options 702 424 1,946

Distributions to non-controlling interest ( 55 ) ( 788 ) —

Net cash (used in) provided by financing activities ( 90,271 ) ( 86,123 ) 113,220

Net cash used in financing activities ( 50,627 ) ( 90,271 ) ( 86,123 )

Net increase in cash and due from banks 1,460 1,820 1,616

3 unchanged sentences

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 8. Financial Statements and Supplementary Data