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Item 1A. Risk Factors

2025-02-28 compared with 2024-02-23 · 98 added, 107 removed, 331 unchanged (38% of the section changed)

An investment in the Company’s common stock or the Series A Preferred Stock involves risks.

Stockholders should carefully consider the risks described below, together with other information contained in this Annual Report on Form 10-K and that was filed with the SEC, before making any purchase or sale decisions regarding the Company’s common stock or Series A Preferred Stock.

Stockholders should carefully consider the risks described below, together with other information contained in this Annual Report on Form 10-K and other documents filed with the SEC, before making any purchase or sale decisions regarding the Company’s common stock or Series A Preferred Stock.

If any of the following risks actually occur, the Company’s financial condition or operating results may be harmed.

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

At December 31, 2023, $6.96 billion, or 68.3%, of the Company’s total loans consisted of commercial real estate, multi-family real estate and land loans, and commercial and industrial loans.

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

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

At December 31, 2024, $6.84 billion, or 67.4%, of the Company’s total loans consisted of commercial real estate, multi-family real estate, construction and land loans, and commercial and industrial loans.

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

These types of loans may expose a lender to greater risk of non-payment and loss

than residential real estate loans because repayment of the loans often depends o n the successful operation of the property or the borrower’s business and the income stream of the borrowers.

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

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Based on these factors, the Bank has a concentration in multi-family and commercial real estate lending, as such loans represented 424% of total bank capital as of December 31, 2024.

The guidance focuses on exposure to commercial real estate loans that are dependent on the cash flow from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment).

The guidance focuses on exposure to commercial real estate loans that are dependent on the cash flows from the real estate held as collateral and that are likely to be at greater risk to conditions in the commercial real estate market (as opposed to real estate collateral held as a secondary source of repayment).

The guidance assists banks in developing risk management practices and determining capital levels commensurate with the level and nature of real estate concentrations.

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and (ii) borrowers in the retail industry of $1.2 billion, or 12% of total loans.

Because of these concentrations of loans in specific industries, a deterioration within these industries, especially those that have been particularly adversely impacted by long-term work-from-home arrangements on the commercial real estate sector, including retail stores, hotels and office buildings, creates greater risk exposure for the Company’s commercial real estate loan portfolio.

A deterioration within these industries, especially those that have been particularly adversely impacted by long-term work-from-home arrangements on the commercial real estate sector, including retail stores, hotels and office buildings, creates greater risk exposure for the Company’s commercial real estate loan portfolio.

Should the fundamentals of the commercial real estate market deteriorate, the Company’s financial condition and results of operations could be adversely affected.

Uncertainties associated with increased originations of commercial real estate, construction and multi-family loans may result in errors in judging collectability, which may lead to additional provisions for credit losses or charge-offs, which would negatively affect the Company’s operations.

The recent and intended increases in the level of commercial lending (including commercial real estate, multi-family real estate and land loans, and commercial and industrial loans) have required and would likely require the Company to lend to borrowers with limited or no experience.

Recently originated loans are unseasoned and the Company does not have a significant payment history pattern with which to judge future collectability.

Further, newly originated loans may not have been subjected to unfavorable economic conditions.

As a result, it may be difficult to predict the future performance of newly originated loans.

These loans may have delinquency or charge-off levels above recent historical experience, which could adversely affect the Company’s future performance.

Further, these types of loans generally have larger balances and involve a greater risk than one-to four-family residential mortgage loans.

Accordingly, if the Company makes any errors in judgment in the collectability of these loans, any resulting charge-offs may be larger on a per loan basis than those incurred historically with the single-family residential mortgage loans.

The Dodd-Frank Act imposes obligations on originators of residential mortgage loans, which if not followed could lead to loan losses, litigation-related expenses, and delays in taking title to real estate collateral in a foreclosure .

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

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

If a loan meets these criteria and is not a “higher

priced loan” as defined in FRB regulations, the CFPB rule establishes a safe harbor preventing a consumer from asserting the failure of the originator to establish the consumer’s Ability-To-Repay.

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

These challenges have yet to be addressed by the courts.

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

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

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

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

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

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

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

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

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

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

A deterioration in economic conditions, especially local conditions, continued high interest

inflation, recession or otherwise, could have the following consequences, any of which could have a material adverse effect on the business, financial condition, liquidity and results of operations, and could more negatively affect the Company compared to a financial institution that operates with more geographic diversity:

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

• demand for the products and services may decline;

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

• the allowance for credit losses may increase;

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

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• the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments.

Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, civil unrest, an outbreak of hostilities or other internati onal or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond the Company’s control could further impact these local economic conditions and could further negatively affect the financial results of banking operations.

Moreover, a significant decline in general economic conditions caused by inflation, tariffs, recession, acts of terrorism, civil unrest, an outbreak of hostilities or other internati onal or domestic calamities, an epidemic or pandemic, unemployment or other factors beyond the Company’s control could further impact these local economic conditions and could further negatively affect the financial results of banking operations.

In addition, deflationary pressures, while possibly lowering operating costs, could have a significant negative effect on borrowers, especially business borrowers, and the values of underlying collateral securing loans, which could negatively affect financial performance.

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

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

Most of the Bank’s loans are s ecured by real estate and are made to borrowers throughout New Jersey and the major metropolitan areas between Massachusetts and Virginia.

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

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Risks Related to Interest Rates

Rising interest rates have decreased the value of the Company’s securities portfolio, and the Company would realize losses if it were required to sell such securities to meet liquidity needs.

As a result of inflationary pressures and the resulting rapid increases in interest rates in 2023, the trading value of previously issued government and other fixed income securities has declined significantly.

These securities make up a majority of the securities portfolio of most banks in the U.S., including the Company’s, resulting in unrealized losses embedded in the securities portfolios and reported as a separate component of stockholders’ equity.

While the Company does not currently intend to sell these securities, if the Company were required to sell such securities to meet liquidity needs, it may incur losses, which could impair the Company’s capital, financial condition, and results of operations and could require the Company to raise additional capital on unfavorable terms, thereby negatively impacting its profitability.

While the Company has taken actions to maximize its funding sources, there is no guarantee that such actions will be successful or sufficient in the event of sudden liquidity needs.

Furthermore, while the Federal Reserve Board has announced a Bank Term Funding Program available to eligible depository institutions secured by U.S.

treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral at par, to mitigate the risk of potential losses on the sale of such instruments, there is no guarantee that such programs will be effective in addressing liquidity needs as they arise.

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

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

Further, interest-

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

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

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

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

In addition, changes in interest rates can affect the average life of loans and investment securities.

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

During the year ended December 31, 2023, the Company incurred other comprehensive gains of $14.3 million, net of tax, related to net changes in unrealized holding gains in the available-for-sale investment securities portfolio, which positively impacted stockholders’ equity, as well as book value per common share.

During the year ended December 31, 2024, the Company incurred other comprehensive

gains of $4.7 million, net of tax, related to net changes in unrealized holding gains in the available-for-sale investment securities portfolio, which positively impacted stockholders’ equity, as well as book value per common share.

The increase occurred even though the securities are not sold.

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The Company must successfully integrate the operations and retain the customers of its acquired institutions .

The Company completes acquisitions of financial institutions and other service companies and continues to explore acquisition opportunities.

Future results of operations will depend in large part on the Company’s ability to successfully integrate the operations of the institutions it acquires and retain the employees and customers of those institutions.

The Company has historically acquired financial institutions and other service companies and continues to explore acquisition opportunities.

Future results of operations will depend in large part on the Company’s ability to successfully integrate the operations of the institutions it acquires, retain the employees and customers of those institutions and achieve the level of expected cost savings and revenue growth.

If the Company is unable to successfully manage the integration of the separate cultures, employee and customer bases and operating systems of the institutions it acquires, the Company’s results of operations may be adversely affected.

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The Company may be challenged to successfully manage its business as a result of the strain on management and operations that may result from growth.

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

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

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

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No assurance can be given that the Company will be successful in these efforts.

The Company’s intent to expand its geographic footprint may not be successful in entering into new markets .

The Company may not be successful in entering into new markets .

The Company intends to expand its geographic footprint through acquisitions and organic growth.

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The Company may need to raise additional capital in the future and such capital may not be available when needed or at terms that are beneficial to stockholders.

Substantial growth may stress regulatory capital levels, and may require the Company to raise additional capital.

Substantial growth may stress regulatory capital levels, and may require the Company to

raise additional capital.

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

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

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

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

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

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

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

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

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

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Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of assets and determination of the level of the allowance for credit losses.

The laws and regulations that govern the Company’s and the Bank’s operations are designed for the protection of depositors and the public, but not the Company’s stockholders.

These provisions, as well as future regulatory or legislative changes applicable to the financial industry, may impact the profitability of the Company’s business activities and may change certain business practices, including the ability to offer new products, obtain financing, generate fee income, attract deposits, make loans and achieve satisfactory interest spreads, and could expose the Company to additional costs, including increased compliance costs.

The laws and regulations that govern the Company’s and the Bank’s operations are designed for the protection of depositors and the public, not the Company’s stockholders.

compliance costs.

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

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

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

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

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

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

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

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

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

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

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

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

Needs to Improve rating under The Community Reinvestment Act may restrict the Company’s operations and limit its ability to pursue certain strategic opportunities.

The Bank received a CRA Performance Evaluation from the OCC with a rating of “Needs to Improve” for the evaluation period January 1, 2018 through December 31, 2020.

Based on its performance on the individual components of the CRA tests, the Bank received a rating of “Low Satisfactory” for the Lending, Investment, and Service Tests.

The Bank’s final overall rating, however, was downgraded to “Needs to Improve” because of a Fair Housing Act violation cited by the OCC.

The Bank’s management has taken actions, including adding to its compliance staff, to address the deficiencies and is committed to taking further voluntary corrective actions.

A “Needs to Improve” rating may restrict certain expansionary activities, including certain mergers and acquisitions and the establishment of Bank branches.

The rating also results in a loss of expedited processing of applications to undertake certain activities.

The rating will remain in place until the OCC issues a revised CRA rating following a subsequent CRA examination.

The next CRA examination is expected to commence sometime in 2024 for the CRA examination period 2021 to 2023.

The precise timing of the examination and any results therefrom will not be known until after the completion of the examination.

The Federal Reserve Board may require the Company to commit capital resources to support the Bank .

Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank and to commit resources to support such subsidiary bank.

Federal law requires that a holding company act as a source of financial and managerial strength to its subsidiary bank and to commit resources to

support such subsidiary bank.

Under the “source of strength” doctrine, the Federal Reserve Board may require a holding company to make capital injections into a troubled subsidiary bank and may charge the holding company with engaging in unsafe and unsound practices for failure to commit resources to a subsidiary bank.

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Under such a scenario, any borrowing or funds needed to raise capital required to make a capital injection may be more difficult and expensive and could have an adverse effect on the Company’s business, financial condition, and results of operations.

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

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

The Company’s total assets were $13.4 billion at December 31, 2024, thereby making it subject to requirements imposed by the Dodd-Frank Act and its implementing regulations, including examination by the CFPB to assess compliance with federal consumer financial laws, imposition of higher FDIC premiums, reduced debit card interchange fees, and enhanced risk management frameworks, all of which increase operating costs and reduce earnings.

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

The asset size whereby an institution received reduced dividends was originally established at $10 billion, but has been increased for inflation such that, for 2023, the asset level is $12.12 billion.

The Company may become subject to enforcement actions even though non-compliance was inadvertent or unintentional.

The financial services industry is subject to intense scrutiny from bank supervisors in the examination process and aggressive enforcement of federal and state regulations, particularly with respect to mortgage-related practices and other consumer compliance matters, and compliance with anti-money laundering, Bank Secrecy Act and Office of Foreign Assets Control regulations, and economic sanctions against certain foreign countries and nationals.

Enforcement actions may be initiated for violations of laws and regulations and unsafe or unsound practices.

The Company maintains systems and procedures designed to ensure that the Company complies with applicable laws and regulations;

however, some legal/regulatory frameworks provide for the imposition of fines or penalties for non-compliance even though the non-compliance was inadvertent or unintentional and even though there was in place at the time systems and procedures designed to ensure compliance.

Failure to comply with these and other regulations, and supervisory expectations related thereto, may result in fines, penalties, lawsuits, regulatory sanctions, reputation damage, or restrictions on the business.

Risks Related to Dividend Payments

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In making such determination under the Company’s capital management plan, the Board of Directors takes into account various factors including economic conditions, earnings, alternative uses of the Company’s capital, liquidity needs, the financial condition of the Company, applicable state law, tax and regulatory requirements and other factors deemed relevant by the Board of Directors.

Although the Company has a history of paying a quarterly dividend on its common stock, there is no guaranty that such dividends will continue to be paid in the future or at what rate.

Although the Company has a long history of paying a quarterly dividend on its common stock, there is no guaranty that such dividends will continue to be paid in the future or at what rate.

Dividends on the Series A Preferred Stock are discretionary and non-cumulative .

Dividends on the Series A Preferred Stock are discretionary and will not be cumulative.

Dividends on the Series A Preferred Stock are discretionary and are not cumulative.

If the Board of Directors does not declare a dividend on the Series A Preferred Stock, no dividend will be deemed to have accumulated for such dividend period, and the Company will have no obligation to pay any dividend for that dividend period at any time, whether or not the Board of Directors declares a dividend on the Series A Preferred Stock or any other class or series of the Company’s capital stock for any future dividend period.

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This competition comes principally from other banks, savings institutions, mortgage bankin g companies and other lenders.

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

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

Many of these competitors enjoy advantages not available to the Company, including greater

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

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

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In attracting deposits, the Company faces substantial competition from other insured depository institutions such as banks, savings institutions and credit unions, as well as institutions offering uninsured investment alternatives, including money market funds.

Many competitors enjoy advantages, including greater financial resources and access to capital, stronger regulatory ratios, more aggressive marketing campaigns, better brand recognition and more branch locations.

Many competitors enjoy advantages not available to the Company, including greater financial resources and access to capital, stronger regulatory ratios, more aggressive marketing campaigns, better brand recognition and more branch locations.

These competitors may offer higher interest rates than the Company, which could decrease the deposits that the Company attracts or require the Company to increase its rates to retain existing deposits or attract new deposits.

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A shift in the mix of payment forms away from the Company’s products and services could have a material adverse effect on the Company’s financial position and results of operations.

The Company has also been active in competing for New Jersey governmental and municipal deposits.

At December 31, 2023, these relationships included public school districts, local municipal governments, and cooperative health insurance funds, which such deposits accounted for approximately 23% of the Company’s total deposits.

Public fund deposits from local government

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

The Company has also been active in competing for New Jersey governmental and municipal deposits including public school districts, local municipal governments, and cooperative health insurance funds.

At December 31, 2024 such deposits accounted for approximately 26% of the Company’s total deposits.

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

Risks Related to Strategic Matters

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The Company may implement new lines of business or offer new products and services within existing lines of business.

In developing and marketing new lines of business and/or new products and services significant time and resources may be invested.

Significant time and resources may be invested in developing and marketing new lines of business and/or new products and services.

Initial timetables for the development and introduction of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible.

Furthermore, if customers do not perceive new offerings as providing significant value, they may fail to accept the new products and services.

Furthermore, customers may fail to accept the new products and services.

External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences may also impact the successful implementation of a new line of business or a new product or service.

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Risks Related to Operational Matters

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

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

Information technology systems are critical to the Company’s business, which includes collecting, processing, transmitting and storing significant amounts of confidential information regarding the Company’s customers, employees and its business, operations, plans and business strategies.

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

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

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

The proliferation of Artificial Intelligence has enhanced actions, strategies, and processes that cyber attackers use to create threats and launch cyberattacks.

Additionally, there is the risk of distributed denial-of-service or other similar attacks, which are intended to disrupt online services.

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

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These risks may increase in the future as the Company continues to increase its mobile and other internet-based product offerings and systems.

In addition, a majority of data processing is outsourced to certain third-party providers.

In addition, a majority of data processing is outsourced to third-party providers.

If these third-party providers encounter difficulties, or if there is difficulty communicating with them, the ability to adequately process and account for transactions could be affected, and business operations could be adversely affected.

Threats to information security also exist in the processing of customer information through various vendors and their personnel.

Breaches of security may occur through intentional or unintentional acts by those having authorized or unauthorized access to the confidential or other information of the Company and its customers, clients or counterparties.

Breaches of security may occur through intentional or unintentional acts by those having access to the confidential or other information of the Company and its customers, clients or counterparties.

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

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

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

The Company’s board of directors relies on management in overseeing cybersecurity risk management.

The Company has a standing Information Technology and Security Management Committee, consisting of leaders across multiple domains.

The Chief Information Security Officer is the primary management liaison to the committee.

The Company has an Information Technology and Security Management Committee, consisting of leaders across multiple domains.

The Chief Information Security Officer is a primary management liaison to the committee.

The committee meets quarterly, or more frequently if needed, and reports to the board of directors after each meeting through committee minutes.

While select Board members of the Company have experience in multiple disciplines including cybersecurity risk management, the Board relies on the Chief Information Security Officer and management for cybersecurity guidance.

If the Company is not able to maintain qualified and experienced directors, it could negatively impact the Company’s security measures, reputation, and growth.

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

The Company’s ability to maximize profitability and manage growth successfully will depend on its ability to continue to attract and retain management and loan officers experienced in banking and financial services and fami liar with the communities in its market area.

The unexpected loss of service of any key management personnel, or the inability to recruit and retain qualified personnel in the future, could adversely affect the Company.

The Company’s ability to maximize profitability and manage growth successfully depends on its ability to attract and retain management and loan officers experienced in banking and financial services and fami liar with the communities in its market area.

The unexpected loss of service of any key management personnel, or the inability to recruit and retain qualified personnel, could adversely affect the Company.

If the Company is not able to attract qualified personnel it could negatively impact the Company’s profitability and growth.

The soundness of other financial institutions could adversely affect the Company .

The Company’s ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions.

Financial services institutions are interrelated as a result of trading, clearing, counterparty and other relationships.

Company has exposure to many different counterparties, and routinely execute transactions with counterparties in the financial industry, including brokers and dealers, other commercial banks, investment banks, mutual and hedge funds, and other financial institutions.

As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by the Company or by other institutions and organizations.

Many of these transactions expose the Company to credit risk in the event of default of the counterparty or client.

In addition, credit risk may be exacerbated when the collateral held by the Company cannot be liquidated or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure that is due.

Any such losses could materially and adversely affect the Company’s results of operations.

Risks Related to Accounting and Internal Controls Matters

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Changes in management’s estimates and assumptions may have a material impact on the Company’s consolidated financial statements and the financial condition or operating results .

In preparing periodic reports the Company is required to file under the Securities Exchange Act of 1934, including the consolidated financial statements, management is and will be required under applicable rules and regulations to make estimates and assumptions as of a specified date.

These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to substantial risk and uncertainty.

In preparing periodic reports the Company is required to file under the Securities Exchange Act of 1934, including the consolidated financial statements, management is required to make estimates and assumptions as of a specified date.

These estimates and assumptions are based on management’s best estimates and experience as of that date and are subject to change.

Materially different results may occur as circumstances change and additional information becomes known, including the evaluation of the adequacy of the allowance for credit losses.

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

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

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

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

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In addition, the card networks require certain capital requirements.

An increase in the required capital level would further limit the Company’s use of capital for other purposes.

An increase in the required capital levels would further limit the Company’s use of capital for other purposes.

Changes in card network rules or standards could adversely affect the Company’s business .

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The Company’s stock price may be negatively impacted by unrelated bank failures and negative depositor confidence in depository institutions.

Further, if the Company is unable to adequately manage liquidity, deposits, capital levels and interest rate risk, which have come under greater scrutiny in light of recent bank failures, it may have a material adverse effect on the Company’s financial condition and results of operations.

On March 8, 2023, Silvergate Capital Corporation, La Jolla, California, the holding company for Silvergate Bank, announced its decision to voluntarily liquidate the Bank and wind down operations.

On March 10, 2023, Silicon Valley Bank, Santa Clara, California, and on May 1, 2023, First Republic Bank, San Francisco, California, were closed by the California Department of Financial Protection and Innovation.

On March 12, 2023, Signature Bank, New York, New York, was closed by the New York State Department of Financial Services.

These banks also had elevated levels of uninsured deposits, which may be less likely to remain at the bank over time and less stable as a source of funding than insured deposits.

These failures led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.

These events have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management.

Further, if the Company is unable to adequately manage liquidity, deposits, capital levels and interest rate risk, it may have a material adverse effect on the Company’s financial condition and results of operations.

Events such as the bank failures that occurred in early 2023 have led to a greater focus by institutions, investors and regulators on the on-balance sheet liquidity of and funding sources for financial institutions, the composition of its deposits, including the amount of uninsured deposits, the amount of accumulated other comprehensive loss, capital levels and interest rate risk management.

If the Company is unable to adequately manage liquidity, deposits, capital levels and interest rate risk, it may have a material adverse effect on its financial condition and results of operations.

Negative developments affecting the banking industry, and resulting media coverage, have eroded customer confidence in the banking system.

The high-profile bank failures in early 2023 have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks.

These market developments have negatively impacted customer confidence in the safety and soundness of financial institutions.

As a result, customers may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of which could materially adversely impact the Company’s liquidity, loan funding capacity, net interest margin, capital and results of operations.

While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of these recently failed banks would have access to their deposits, including previously uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly.

The Company is a community bank and its ability to maintain its reputation is critical to the success of the business.

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In addition, third parties with whom the Company has relationships may take actions over which the Company has limited control that could negatively impact perceptions about the Company or the financial services industry.

The proliferation of social media may increase the likelihood that negative information about the Company, whether or not the information is accurate, could impact the Company’s reputation and business.

The proliferation of social media may increase the likelihood that negative information about the Company, whether or not accurate, could impact the Company’s reputation and business.

Negative publicity regarding the Company’s business, employees, or customers, with or without merit, may result in the loss of customers and employees, costly litigation and increased governmental regulation, all of which could adversely affect the Company’s business and operating results.

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The Company also receives funds from loan repayments, investment maturities and income on other interest-earning assets.

While the Company emphasizes the generation of low-cost deposits as a source of funding, there is strong competition for such deposits in the Company’s market area.

While the Company

emphasizes the generation of low-cost deposits as a source of funding, there is strong competition for such deposits in the Company’s market area.

Additionally, deposit balances can decrease if customers identify alternative investments opportunities.

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Federal Taxation

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

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

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

The current applicable statutory tax rate is 21%.

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

Inflation Reduction Act of 2022.

The Inflation Reduction Act implemented a new alternative minimum tax of 15% on corporations with profits in excess of $1 billion, a 1% excise tax on stock repurchases, and several tax incentives to promote clean energy and climate initiatives.

These provisions were effective beginning January 1, 2023.

This legislation has not had a material impact on the Company’s consolidated financial statements.

State and Local Taxation

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

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

The Company is required to file a New Jersey income tax return.

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

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

For 2019 and prospectively, New Jersey law requires combined filing for members of an affiliated group, but excludes companies that qualify as a New Jersey Investment Company (“ICs”) and Real Estate Investment Trusts (“REITs”).

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

During 2023, the New Jersey Division of Taxation enacted certain tax reform legislation.

Most notably to the Company, for periods ending on and after July 31, 2023, companies meeting the statutory definition of “captive” ICs and REITs are required to be included in the combined filing.

This legislation included an exception if at least 50% of the shares, by vote or value, are owned or controlled, directly or indirectly, by a state or federally chartered bank, savings bank, or savings and loan association (financial institution) with assets of $15 billion or less.

New Jersey currently also imposes a Corporate Transit Fee of 2.5%, which applies to the Company, for corporations with a taxable net income over $10 million effective through December 31, 2028.

For 2019 and prospectively, New Jersey law requires combined filing for members of an affiliated group, but excluded companies that qualify as a New Jersey Investment Company (“ICs”) and Real Estate Investment Trusts (“REITs”).

F or periods ending on and after July 31, 2023, companies meeting the statutory definition of “captive” ICs and REITs are required to be included in the combined filing.

This legislation included an exception if at least 50% of the shares, by vote or value, are owned

or controlled, directly or indirectly, by a state or federally chartered bank, savings bank, or savings and loan association (financial institution) with assets of $15 billion or l ess.

As of December 31, 2024 the Company qualified for this exception.

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

New York Taxation .

The Company is required to file New York State (“NYS”) and New York City (“NYC”) tax returns.

The NYS and NYC returns require consolidation of all entities, including OceanFirst Realty, and taxable income, consistent with other states, generally means Federal taxable income subject to certain adjustments.

The NYS and NYC returns require consolidation of all entities and taxable income, consistent with other states, generally means Federal taxable income subject to certain adjustments.

For NYS tax purposes, corporations are presently taxed at a rate equal to 7.25% of taxable income, in addition to a temporary Metropolitan Transportation Authority surtax of 30% of the NYS tax rate, which is effective through December 31, 2026, for an overall NYS rate of 9.425%.

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

Other City and State Taxation .

The Company or the Bank are required to file other city and state tax returns within its geographical footprint.

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

Delaware Taxation .

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

What changed 10-K

Item 1A. Risk Factors