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Item 7. Management’s Discussion and Analysis

2025-02-28 compared with 2024-02-23 · 151 added, 171 removed, 392 unchanged (45% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

OceanFirst Financial Corp.

(the “Company”) has been the holding company for OceanFirst Bank N.A.

(the “Bank”) since the Company’s initial public offering.

The Company conducts business primarily through its ownership of the Bank, which, at December 31, 2024, primarily operated out of its headquarters located in Toms River, New Jersey and its administrative office located in Red Bank, New Jersey.

The Bank also conducts its business at 39 branch offices and various deposit production facilities located throughout central and southern New Jersey and the greater metropolitan areas of New York City and Philadelphia.

The Bank also operates commercial loan production offices in New Jersey, New York City, the greater Philadelphia area, Baltimore, and Boston.

The Bank also conducts its business at 39 branch offices and various deposit production facilities located throughout central and southern New Jersey and major metropolitan areas of New York City and Philadelphia.

The Bank also operates commercial loan production offices in New Jersey, New York City, the greater Philadelphia area, Pittsburgh, Washington D.C., Baltimore, and Boston.

The Company’s results of operations are primarily dependent on net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and investments, and the interest expense on its interest-bearing liabilities, such as deposits and borrowings.

The Company also generates non-interest income such as income from bankcard services, trust and asset management products and services, deposit account services, and commercial loan swap income.

The Company also generates non-interest income such as income from bankcard services, trust and fiduciary services, deposit account services, and commercial loan swap income.

The Company’s operating expenses primarily consist of compensation and employee benefits, occupancy and equipment, marketing, federal deposit insurance and regulatory assessments, data processing, check card processing, professional fees and other general and administrative expenses.

The Company’s results of operations are significantly affected by competition, general economic conditions, including levels of unemployment and real estate values, as well as changes in market interest rates, inflation, government policies and actions of regulatory agencies.

The Company operates as a full-service regional community bank delivering comprehensive financial products and services, which includes commercial and consumer financing, deposit services, and wealth management products and services, throughout New Jersey and the major metropolitan markets of Philadelphia, New York, Baltimore, and Boston.

The Company operates as a full-service regional community bank delivering comprehensive financial products and services, which includes commercial and consumer financing, deposit services, and wealth management products and services, throughout New Jersey and in the major metropolitan areas between Massachusetts and Virginia.

The Company competes with larger, out-of-market financial service providers through its local and digital focus and the delivery of superior service.

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To accomplish these objectives, the Company has sought to:

(1) diversify and strengthen its deposit base through product offerings appealing to a broadened customer base;

(2) grow the commercial banking business, with a particular focus on strengthening commercial and industrial banking;

(3) expand the residential lending business, focusing on the secondary market and saleable loan business;

(3) diversify and strengthen its deposit base through product offerings appealing to a broadened customer base;

and (4) improve operating efficiency through the ongoing investment in information technology.

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The Company will also continue to build additional operational infrastructure and invest in key personnel in response to growth and changing business conditions.

Although the Company’s overall long-term strategy has not changed, the Company took several precautionary measures in response to the bank failures of early 2023 and the related industry-wide concerns around liquidity, funding, and the rapidly increasing interest rate environment.

These measures included building liquidity, deposits, and contingent funding sources;

strengthening and monitoring credit quality;

re-evaluating the securities portfolio;

and building and preserving capital.

The Company has continued to maintain and strengthen its liquidity and capital position, while servicing its customers and communities.

Refer to ‘Liquidity and Capital Resources’ for further discussion.

Diversify and Strengthen Deposit Base

The Company continues to focus on deposit growth through a series of initiatives intended to both grow deposits and diversify sources of liquidity.

The Company seeks to increase deposits in its primary market area by improving market penetration and expanding deposit gathering initiatives and hires.

The Company has benefited from and remains focused on efforts to attract business deposits in conjunction with its commercial lending operations and from an expanded mix of retail products and services.

Ongoing product development and design to deepen market penetration will allow the Company to rely on competencies in commercial lending and the retail branch network to drive growth and diversification of deposits.

The Company continues to invest in the overall customer experience with the Company’s customer satisfaction performance and digital capabilities on par with national banks and fintech companies.

Commercial Banking

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The Company has had success in developing new client relationships in the Company’s focused expansion markets, which include Philadelphia, New York, Boston and Baltimore.

Expanding the Company’s geographies provides a hedge on risks or issues that may arise if the Company was fully concentrated in a single market.

Expanding the Company’s geographies and diversifying the loan book provides a hedge on risks deriving from a concentration in a single market.

While these growth markets are important to the Company’s strategy, the Company has continued efforts to keep the community bank feel for customers, employees, and stakeholders, which has been a focal point for longstanding stable funding, brand reputation, and community development efforts in the Company’s legacy markets.

The Company’s early expansion efforts were dependent on commercial real estate (“CRE”) lending, however, its path forward as a regional bank includes a transition away from CRE dependence and a focus on future growth predominately around the C&I portfolio.

The Company has made a significant effort to recruit new relationship managers that specialize in clients doing business in deposit rich industries.

The Company anticipates that the acquisition of these customers will help to drive quality funding with expanded yields.

Additionally, the Company continues to improve its treasury management function by enhancing capabilities through expanded product offerings and thoughtfully evaluating opportunities to further bolster talent and technology to better serve the Company’s customers.

At December 31, 2023, commercial loans (which includes multi-family and commercial real estate loans, commercial construction loans, and commercial and industrial loans) represented 68.3% of the Company’s total loans, as compared to 68.2% at December 31, 2021, while commercial and industrial loans represented 6.5% of total loans as compared to 5.2% at December 31, 2021.

Due to industry and market events during 2023, the Company methodically slowed loan growth in an effort to maintain strong liquidity and grow capital levels.

The Company’s early expansion efforts were dependent on commercial real estate (“CRE”) lending;

however, its path forward as a regional bank includes a transition away from CRE dependence and a focus on future growth predominately around the C&I portfolio.

The Company has continued to make significant efforts to recruit new relationship managers that specialize in clients operating in deposit heavy industries.

The Company anticipates that the acquisition of these customers will help to drive quality funding through deeper deposit relationships.

Additionally, the Company continues to improve its treasury management capabilities by enhancing services through expanded product offerings and thoughtfully evaluating opportunities to further bolster talent and technology to better serve the Company’s customers.

At December 31, 2024, commercial loans (which includes multi-family and commercial real estate loans, commercial construction loans, and commercial and industrial loans) represented 67.4% of the Company’s total loans, as compared to 68.5% at December 31, 2022, of which commercial and industrial loans represented 6.4% of total loans as compared to 6.3% at December 31, 2022.

Commercial loan products entail a higher degree of credit risk than residential real estate lending activity.

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Investments in Residential Lending

The Company began its expansion of the residential lending business into new and adjacent geographies, which included the recruitment of leadership roles and sales personnel in expanded geographies and a focus on secondary marketing and saleable loans.

While the economic environment in 2023, with markedly higher rates, was a headwind, the Company remains committed to this segment and have deepened its focus on the longstanding commitment to its communities with enhanced products and pricing in the NeighborFirst and special credit programs and the recruitment of Community Reinvestment Act (“CRA”) residential loan officers for the Company’s footprint.

The Company continued its expansion of the residential lending business into new and adjacent geographies, which included the recruitment of leadership roles and sales personnel in expanded geographies and a focus on secondary marketing and saleable loans.

While the economic environment in 2024, with continued higher rates, was a headwind, the Company remains committed to this segment and has deepened its focus on the longstanding commitment to its communities with enhanced products and pricing in the NeighborFirst and special credit programs, expansion of product offerings, and the recruitment of Community Reinvestment Act (“CRA”) residential loan officers for the Company’s footprint.

The Company has a long history as a residential lender and continues to expand this portfolio with a continued focus on customer relationships.

At December 31, 2023, residential loans represented 29.3% of the Company’s total loans at December 31, 2023 as compared to 28.8% at December 31, 2021.

Diversify and Strengthen Deposit Base

The Company continues to focus on deposit growth through a series of initiatives intended to both grow deposits and diversify sources of liquidity.

The Company seeks to increase deposits in its primary market area by improving market penetration.

The Company continues to invest in the overall customer experience with the Company’s customer satisfaction performance and digital capabilities on par with national banks and fintech companies.

At December 31, 2024, residential loans represented 30.3% of the Company’s total loans as compared to 28.9% at December 31, 2022.

Operating Efficiency

The Company relies on technology and the resources that support its operations to provide a broad suite of financial services and experience to its customers and employees, to differentiate the Company in its diverse markets, and to drive operational efficiencies that yield performance with strong customer services.

The Company’s investment in technology lays a foundation for future growth, scale, and operational efficiency.

Focus areas include digital-direct customer engagement, efficient customer servicing, support safe banking operations and strategic technology change, and competitively delivering new lending and customer self-service capabilities in the post-pandemic influenced environment.

The Company’s investment in technology lays a foundation for future growth, scale, and operational efficiency while maintaining a secure and robust cybersecurity framework.

Focus areas include digital-direct customer engagement, efficient customer servicing, supporting safe banking operations and strategic technology change, and competitively delivering new lending and customer self-service capabilities in the post-pandemic influenced environment.

Capital Management

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The Company conducts capital stress testing, which includes evaluating the effects of various scenarios on capital, as one means of evaluating capital adequacy.

The results of stress testing are considered in the capital planning process and strategy

The results of stress testing are considered in the capital planning process and strategy development.

The Company also analyzes the need to raise additional capital in the future, through issuance of debt or equity, to meet its commitments and business needs.

Over the past five years, the Company has implemented or announced two stock repurchase programs.

Over the past five years, the Company has implemented or announced two stock

repurchase programs.

On June 25, 2021, the Company announced the authorization to repurchase up to an additional 5% of the Company’s outstanding common stock, or 3.0 million shares.

For the year ended December 31, 2023, the Company did not repurchase any shares of its common stock under this repurchase program to strategically build capital.

For the year ended December 31, 2024, the Company repurchased 1,383,238 shares of its common stock under this repurchase program to strategically build capital.

At December 31, 2024, the Company remains authorized to repurchase 1,551,200 shares and will prudently evaluate repurchase opportunities while maintaining existing capital levels.

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Net interest income 334,035 369,731 377,477

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 (excluding activity related to debt and equity investments) 38,053 49,409 44,786

Provision for credit losses 6,263 17,678 7,768

Spring Garden opening provision for credit losses 1,426 — —

Net interest income after provision for credit losses 326,346 352,053 369,709

Other income (excluding activity related to debt and equity investments and sale of trust business) 43,362 38,053 49,409

Net gain on equity investments 4,225 876 9,685

Net gain on sale of trust business 2,600 — —

Net loss on sale of investments — (5,305) —

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Wealth assets under administration and management (“AUA/M”) (11)

$ 147,956 $ 335,769 $ 324,066

Nest Egg AUA/M 431,434 401,420 403,538

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(1) With the exception of end of year ratios, all ratios are based on average daily balances.

(2) Performance ratios for 2024 included a net benefit related to Spring Garden Capital Group, LLC (“Spring Garden”) opening provision for credit losses, a net gain on equity investments, a net gain on sale of trust business, FDIC special assessment and merger related expenses of $3.2 million, or $2.5 million, net of tax expense.

Performance ratios for 2023 included a net expense related to merger related expenses, net branch consolidation expense, FDIC special assessment, net loss on sale of investments and net gain on equity investments of $6.2 million, or $4.7 million, net of tax benefit.

Performance ratios for 2022 included a net benefit related to merger related expenses, net branch consolidation expense, and gain on equity investments of $6.2 million, or $4.6 million, net of tax expense.

Performance ratios for 2021 included a net expense related to merger related expenses, net branch consolidation expenses, and a net gain on equity investments of $6.7 million, or $5.1 million, net of tax benefit.

(3) Ratios for each period are based on net income available to common stockholders.

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(7) Total loans receivable excludes loans held-for-sale.

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

(8) The years ended December 31, 2023 and 2024 include the addition and subsequent resolution of a single commercial relationship exposure of $7.2 million, which had life-to-date charge-offs of $10.0 million.

(9) Non-performing assets consist of non-performing loans and real estate acquired through foreclosure.

Non-performing loans generally consist of all loans 90 days or more past due and other loans in the process of foreclosure.

Non-performing loans and assets generally consist of all loans 90 days or more past due and other loans in the process of foreclosure.

It is the Company’s policy to cease accruing interest on all such loans and to reverse previously accrued interest.

(10) The loans acquired from prior bank acquisitions were recorded at fair value.

(10) Loans acquired from acquisitions were recorded at fair value.

The net unamortized credit and purchased with credit deterioration (“PCD”) marks on these loans, not reflected in the allowance for loan credit losses, was $6.0 million, $7.5 million, and $11.4 million at December 31, 2024, 2023, and 2022, respectively.

(11) During 2024, the Company sold a portion of its trust business resulting in gain on sale of $2.6 million.

Highlights of the Company’s financial results for the year ended December 31, 2024 as compared to December 31, 2023 were as follows:

Total assets increased by $434.4 million to $13.54 billion, from $13.10 billion primarily due to purchases of available-for-sale debt securities and loan growth.

Available for sale debt securities increased by $296.2 million to $753.9 million, from $457.6 million, primarily due to purchases of variable-rate mortgage-backed securities.

Total loans increased by $276.5 million to $10.19 billion, from $9.92 billion, due to loan originations and growth.

Total liabilities increased by $357.9 million to $11.88 billion, from $11.52 billion.

Total deposits increased by $759.7 million to $10.43 billion from $9.68 billion, partially offset by a decrease in FHLB advances of $362.5 million to $848.6 million from $1.21 billion, respectively, due to mix shift in funding sources from FHLB advances to deposits.

Total assets decreased by $117.0 million to $13.42 billion, from $13.54 billion, primarily due to decreases in loans and securities.

Total loans decreased by $76.5 million to $10.12 billion, from $10.19 billion, primarily due to a decrease in the total commercial portfolio of $126.6 million driven by loan payoffs, partly offset by an increase in residential loans of $70.2 million.

Debt securities held-to-maturity decreased by $113.9 million to $1.05 billion, from $1.16 billion, primarily due to principal repayments.

Debt securities available-for-sale increased by $73.6 million to $827.5 million, from $753.9 million, primarily due to new purchases.

Total liabilities decreased by $157.8 million to $11.72 billion, from $11.88 billion, primarily related to lower deposits and a funding mix shift.

Total deposits decreased by $368.6 million to $10.07 billion from $10.43 billion, partially offset by an increase in FHLB advances of $224.0 million to $1.07 billion from $848.6 million, as a result of lower-cost funding availability.

Net income available to common stockholders was $96.0 million, or $1.65 per diluted share, as compared to $100.0 million, or $1.70 per diluted share.

Net income available to common stockholders for the year ended December 31, 2023 included net loss on sale of investments of $5.3 million, a special assessment charge of $1.7 million related to the FDIC’s final rule to recover the loss on the Deposit Insurance Fund (“DIF”), net branch consolidation expenses of $70,000, merger related expenses of $22,000, and net gain on equity investments of $876,000.

Net income available to common stockholders for the year ended December 31, 2024 included an opening provision for credit losses related to the acquisition of Spring Garden of $1.4 million, net gain on equity investments of $4.2 million, net gain on sale of trust business of $2.6 million, merger related expenses of $1.8 million, and a special assessment charge of $418,000 related to the FDIC’s final rule to recover the loss on the Deposit Insurance Fund (“DIF”).

These items increased net income in the current year by $2.5 million, net of tax, and diluted earnings per share by $0.05.

Net income available to common stockholders for the year ended December 31, 2023 included net loss on sale of investments of $5.3 million, net gain on equity investments of $876,000, a special assessment charge of $1.7 million related to the FDIC’s final rule to recover the loss on the DIF, net branch consolidation expenses of $70,000, and merger related expenses of $22,000.

These items decreased net income in the current year by $4.7 million, net of tax, and diluted earnings per share by $0.08.

Net income available to common stockholders for the year ended December 31, 2022 included net gain on equity investments of $9.7 million, merger related expenses of $2.7 million, and net branch consolidation expenses of $713,000.

These items increased net income in the prior year by $4.6 million, net of tax, and diluted earnings per share by $0.08.

The Company's estimated common equity tier 1 capital ratio increased to 10.86%.

The Company's common equity tier 1 capital ratio increased to 11.17%.

Additionally, the Company remains well-capitalized with a stockholders’ equity to total assets ratio of 12.69% at December 31, 2024.

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The following table sets forth certain information relating to the Company for each of the years ended December 31, 2024, 2023 and 2022.

The yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods shown except where noted otherwise.

The yields and costs are derived by dividing the income or expense by the average balance of assets or liabilities, respectively, for the periods shown except where noted otherwise.

Average balances are derived from average daily balances.

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Other borrowings 484,406 28,426 5.87 307,368 19,294 6.28 203,117 12,153 5.98

307,368 19,294 6.28 203,117 12,153 5.98 228,600 11,291 4.94

Total borrowings 1,300,380 66,005 5.08 1,326,727 66,225 4.99 694,244 22,677 3.27

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Non-interest-bearing liabilities 245,680 262,883 239,861

262,883 239,861 151,950

Total liabilities

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(2) Amount is net of deferred loan costs and fees, undisbursed loan funds, discounts and premiums and allowance for loan credit losses, and includes loans held-for-sale and non-performing loans.

(3) F or 2023, the average balances of derivative cash collateral have been reclassified from non-interest bearing liabilities to other borrowings.

(3) Net interest rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

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Comparison of Financial Condition at December 31, 2024 and December 31, 2023

Total assets increased by $434.4 million to $13.54 billion, from $13.10 billion, primarily due to purchases of available-for-sale debt securities and loan growth.

Available-for-sale debt securities increased by $296.2 million to $753.9 million, from $457.6 million, primarily due to purchases of variable-rate mortgage-backed securities in the fourth quarter of 2023.

Total loans increased by $276.5 million to $10.19 billion, from $9.92 billion, due to loan originations and growth.

Other assets decreased by $41.4 million to $179.7 million, from $221.1 million, primarily due to a decrease in the market values associated with customer interest rate swap programs.

Total liabilities increased by $357.9 million to $11.88 billion, from $11.52 billion.

Deposits increased by $759.7 million to $10.43 billion, from $9.68 billion.

Time deposits increased by $903.4 million to $2.45 billion, from $1.54 billion, or 23.4% and 15.9% of total deposits, respectively.

Retail time deposits increased $1.13 billion, while brokered time deposits decreased $242.0 million.

Total assets decreased by $117.0 million to $13.42 billion, from $13.54 billion, primarily due to decreases in loans and securities.

The loan pipeline increased by $123.6 million to $306.7 million, from $183.0 million.

Loan originations increased $290.7 million to $515.2 million, from $224.5 million, primarily in commercial and residential loans.

For more information on the composition of the loan portfolio, see “Lending Activities.” Debt securities held-to-maturity decreased by $113.9 million to $1.05 billion, from $1.16 billion, primarily due to principal repayments.

Debt securities available-for-sale increased by $73.6 million to $827.5 million, from $753.9 million, primarily due to new purchases.

Goodwill increased by $17.2 million to $523.3 million, from $506.1 million due to the acquisition of Spring Garden.

Total liabilities decreased by $157.8 million to $11.72 billion, from $11.88 billion primarily related to lower deposits and a funding mix shift.

Deposits decreased by $368.6 million to $10.07 billion, from $10.43 billion, primarily due to decreases in time deposits of $364.5 million and high-yield savings accounts of $332.4 million, offset by increases in money market accounts of $279.4 million.

Time deposits decreased by $364.5 million to $2.08 billion, from $2.45 billion, representing 20.7% and 23.4% of total deposits, respectively, primarily related to planned runoff of brokered time deposits, which decreased by $556.8 million, offset by increases in retail time deposits of $203.5 million.

The loans-to-deposit ratio was 100.5%, as compared to 97.7%.

FHLB advances decreased by $362.5 million to $848.6 million, from $1.21 billion due to mix shift in funding sources from FHLB advances to deposits.

Other liabilities decreased by $45.4 million to $300.7 million, from $346.2 million, primarily due to a decrease in the market values associated with customer interest rate swaps and related collateral received from counterparties.

Total stockholders’ equity increased to $1.66 billion, as compared to $1.59 billion, primarily reflecting net income, net of dividends, for the year ended December 31, 2023.

FHLB advances increased by $224.0 million to $1.07 billion, from $848.6 million as a result of lower-cost funding availability.

Capital levels remain strong and in excess of “well-capitalized” regulatory levels at December 31, 2024, including the Company’s common equity tier one capital ratio, which increased to 11.17%, up approximately 30 basis points from December 31, 2023.

Total stockholders’ equity increased to $1.70 billion, as compared to $1.66 billion, primarily reflecting net income, partially offset by capital returns comprising of dividends and share repurchases.

For the year ended December 31, 2024, the Company repurchased 1,383,238 shares totaling $21.5 million at a weighted average cost of $15.38.

The Company had 1,551,200 shares available for repurchase under the authorized repurchase program at December 31, 2024.

Additionally, accumulated other comprehensive loss decreased by $5.0 million primarily due to increases in fair market value of available-for-sale debt securities, net of tax.

For the year ended December 31, 2023, the Company did not repurchase shares under its stock repurchase program.

There were 2,934,438 shares available for repurchase at December 31, 2023 under the existing repurchase program.

Stockholders’ equity per common share increased to $27.96, as compared to $26.81.

The Company’s stockholders’ equity to assets ratio was 12.69%, as compared to 12.28% and book value per common share increased to $29.08, as compared to $27.96.

Comparison of Operating Results for the Years Ended December 31, 2024 and December 31, 2023

Net income available to common stockholders decreased to $96.0 million, or $1.65 per diluted share, as compared to $100.0 million, or $1.70 per diluted share.

Net income available to common stockholders for the year ended December 31, 2023 included net gain on equity investments of $876,000, net loss on sale of investments of $5.3 million, a special FDIC assessment of $1.7 million, net branch consolidation expenses of $70,000, and merger related expenses of $22,000.

These items decreased net income in the current year by $4.7 million, net of tax.

Net income for the year ended December 31, 2022 included a net gain on equity investments of $9.7 million, merger related expenses of $2.7 million, and net branch consolidation expenses of $713,000.

These items increased net income for the prior year by $4.6 million, net of tax.

Net income available to common stockholders for the year ended December 31, 2024 included the Spring Garden opening provision for credit losses of $1.4 million, net gain on equity investments of $4.2 million, a net gain on sale of a portion of its trust business of $2.6 million, a special FDIC assessment of $418,000 and merger related expenses of $1.8 million.

These items increased net income in the current year by $2.5 million, net of tax.

Net income for the year ended December 31, 2023 included a net gain on equity investments of $876,000, net loss on sale of investments of $5.3 million, a special FDIC assessment of $1.7 million, net branch consolidation expenses of $70,000, and merger related expenses of $22,000.

These items decreased net income for the prior year by $4.7 million, net of tax.

Interest Income

Interest income increased to $642.2 million, from $608.0 million.

The yield on average interest-earning assets increased to 4.96%, from 3.85%, due to the impact of rising rates.

Average interest-earning assets increased by $1.06 billion, primarily driven by increases in total loans of $693.2 million and interest-earning deposits and short-term investments of $254.6 million.

The yield on average interest-earning assets increased to 5.23%, from 4.96%, due to the impact of the rate environment.

The average balance of interest-earning assets increased by $29.8 million, primarily driven by redeployment of cash into securities, which grew by $179.0 million.

Interest Expense

Interest expense increased to $238.2 million, from $53.7 million, reflecting rising rates on costs and deposit mix shift to higher cost time deposits.

The cost of average interest-bearing liabilities increased to 2.45%, from 0.65%, primarily due to higher cost of deposits and FHLB advances.

Interest expense increased to $308.1 million, from $238.2 million, reflecting an increase in the cost of deposits.

The cost of average interest-bearing liabilities increased to 3.10%, from 2.45%, primarily due to higher cost of deposits.

The total cost of deposits (including non-interest bearing deposits) increased to 2.36%, from 1.68%.

Net Interest Income and Margin

Net interest income decreased to $369.7 million, from $377.5 million, reflecting the net impact of the higher interest rate environment.

Net interest margin decreased to 3.02%, from 3.37%.

Net interest margin decreased primarily due to a mix-shift to and repricing of higher cost deposits that outpaced the increase in yields on interest-earning assets.

Net interest income decreased to $334.0 million, from $369.7 million, reflecting the net impact of the interest rate environment.

The net interest margin decreased to 2.72%, from 3.02%, primarily due to the increase in cost of funds outpacing the increase in yield on average interest-earning assets.

Provision for Credit Losses

During 2023, a single commercial relationship had a $8.4 million partial charge-off, which resulted in a remaining exposure of $8.8 million.

Provision for credit losses was $7.7 million, as compared to $17.7 million.

The provision for credit losses for the year ended December 31, 2023 included the net impact of the charge-off noted above, and to a lesser extent, the net effect of credit rating migrations.

Net loan charge-offs were $8.4 million for the current year, as compared to net loan recoveries of $340,000 in the prior year.

The increase in net loan charge-offs was due to the single commercial relationship charge-off noted above.

Non-performing loans totaled $29.5 million, as compared to $23.3 million.

The increase in non-performing loans was primarily due to the remaining exposure of the charge-off noted above, partly offset by loans that were paid off or returned to accrual status.

Current year included a $1.4 million initial provision for credit losses related to the acquisition of Spring Garden.

The remaining provision was driven by net change in downside macro-economic forecasts utilized in the estimate, partly offset by a decrease in criticized and classified assets.

Prior year included the impact of a single commercial relationship that had a $8.4 million partial charge-off, and to a lesser extent, the net effect of credit rating migrations.

Net loan charge-offs were $1.6 million for the current year, as compared to $8.4 million in the prior year.

The current year and prior year included partial charge-offs of $1.6 million and $8.4 million, respectively, for a single commercial real estate relationship noted above, which was resolved through the sale of the underlying collateral in the current year.

Non-interest Income

Other income decreased to $33.6 million, from $59.1 million.

Other income for the year ended December 31, 2023 was adversely impacted by net losses on equity investments of $4.4 million, which included $5.3 million of losses related to the sale of investments in the first quarter of 2023.

Other income for the year ended December 31, 2022 was favorably impacted by net gains on equity investments of $9.7 million in the prior year, which included an unrealized gain on the Auxilior Capital Partners, Inc.

(“Auxilior”) investment.

The remaining decrease of $11.4 million for the year ended December 31, 2023, as compared to the prior year, was driven by decreases in commercial loan swap income of $6.3 million on lower volume, fees and service charges of $1.5 million primarily due to lower title activity, and bank owned life insurance of $1.3 million related to non-recurring death benefits recognized in the prior year.

Additionally, bankcard services revenue decreased $3.3 million due to the Durbin Amendment, which became effective for the Company on July 1, 2022.

Other income increased to $50.2 million, from $33.6 million.

Other income for the year ended December 31, 2024 was favorably impacted by net gains on equity investments of $4.2 million and a net gain on sale of a portion of its trust business of $2.6 million.

The prior year was adversely impacted by net losses on investments of $4.4 million, which included $5.3 million of losses related to the sale of investments.

The remaining increase of $5.3 million, was primarily driven by increases in the cash surrender value of bank owned life insurance of $2.6 million, which included one-time death benefits of $1.3 million in the current year, net gain on sale of loans of $1.9 million, and a non-recurring gain on sale of assets held for sale of $855,000.

This was partially offset by a decrease in trust and asset management revenue of $784,000, related to the sale of a portion of the Company’s trust business.

Non-interest Expense

Operating expenses increased to $248.9 million, from $234.9 million.

Operating expenses for the year ended December 31, 2023 and 2022 included $92,000 and $3.4 million, respectively, of merger related and net branch consolidation expenses.

Operating expenses for the year ended December 31, 2023 also included an FDIC special assessment of $1.7 million.

The remaining increase of $15.7 million for the year ended December 31, 2023, as compared to the prior year, was due to increases in professional fees of $5.3 million and compensation and benefits of $3.9 million related to the Company’s performance improvement initiatives and strategic investments, as well as related severance and other program costs.

Additionally, there were increases in federal deposit insurance and regulatory assessments of $2.1 million, primarily due to new assessment rates that went into effect on January 1, 2023, and data processing expense of $1.7 million, partly driven by one-time recoveries recorded in the prior year.

Marketing expense also increased $1.3 million due to the Company’s enhanced digital strategy efforts, and other operating expenses included higher expenses of $1.1 million primarily related to real estate charges on assets sold during the period from assets held for sale.

Operating expenses decreased to $245.9 million, from $248.9 million.

Operating expenses for the year ended December 31, 2024 were adversely impacted by $1.8 million for merger related expenses and $418,000 for FDIC special assessment in the current year.

The prior year was adversely impacted by an FDIC special assessment of $1.7 million, and $92,000 for merger related and net branch consolidation expenses in the prior year.

The remaining decrease of $3.5 million, was due to decrease in professional fees of $8.8 million as the Company realized benefits from the performance improvement initiatives and investments made in the prior the year.

This was partially offset by increases in other operating expense of $3.0 million, which was partly due to additional loan servicing expenses, and compensation and benefits of $2.5 million, primarily due to the acquisitions during the year.

Income Tax Expense

The provision for income taxes was $32.7 million, as compared to $46.6 million, primarily reflecting the decrease in income before provision for income taxes.

The provision for income taxes was $30.3 million, as compared to $32.7 million.

The effective tax rate was 23.2%, as compared to 23.9%.

The current year’s effective tax rate was adversely impacted by a non-recurring write-off of a deferred tax asset of $1.2 million net of other state effects and credits as compared to the prior year period.

Comparison of Operating Results for the Years Ended December 31, 2023 and December 31, 2022

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The Company has an internal policy that addresses liquidity, and management monitors the adherence to policy limits to satisfy current and future cash flow needs.

The policy includes internal limits, monitoring of key indicators, deposit concentrations, liquidity sources and availability, quarterly stress testing, collateral management, and other qualitative and quantitative metrics.

Management monitors cash on a daily basis to determine the liquidity needs of the Bank and OceanFirst Financial Corp.

The policy includes internal limits, monitoring of key indicators, deposit concentrations, liquidity sources and availability, stress testing, collateral management, and other qualitative and quantitative metrics.

Management monitors cash daily to determine the liquidity needs of the Bank and OceanFirst Financial Corp.

(the “Parent Company”), a separate legal entity from the Bank.

Additionally, management performs multiple liquidity stress test scenarios on a quarterly basis.

As of December 31, 2023, the Bank and Parent Company continued to maintain adequate liquidity under all stress scenarios.

Additionally, management performs multiple liquidity stress test scenarios on a periodic basis.

As of December 31, 2024, the Bank and the Parent Company continued to maintain adequate liquidity under all stress scenarios.

The Company also has a detailed contingency funding plan and obtains comprehensive reporting of funding trends on a monthly and quarterly basis, which are reviewed by management.

The Company continually evaluates its on-balance sheet liquidity, including cash and unpledged securities and funding capacity at the FHLB, FRB Discount Window, and Bank Term Funding Program (“BTFP”), and periodically tests each of its lines of credit.

The Company continually evaluates its on-balance sheet liquidity, including cash and unpledged securities and funding capacity at the FHLB and FRB Discount Window, and periodically tests each of its lines of credit.

As of December 31, 2024, total on-balance sheet liquidity and funding capacity was $3.8 billion.

The Company has a highly operational and granular deposit base, with long-standing client relationships across multiple customer segments providing stable funding.

The vast majority of the government deposits are protected by the Federal Deposit Insurance Corporation insurance as well as the State of New Jersey under the Government Unit Deposit Protection Act, which requires uninsured government deposits to be further collateralized by the Bank.

The vast majority of the government deposits are protected by the FDIC insurance as well as the State of New Jersey under the Government Unit Deposit Protection Act, which requires uninsured government deposits to be further collateralized by the Bank.

At December 31, 2024, the Bank reported in its Call Report $5.75 billion of total uninsured deposits.

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While scheduled payments on loans and securities are predictable sources of funds, deposit flows, loan prepayments, and loan and investment sales are greatly influenced by interest rates, economic conditions, and competition.

The Bank has other sources of liquidity if a need for additional funds arises, including various lines of credit at multiple financial institutions, access to the FRB discount window, and the BTFP.

The Bank has other sources of liquidity if a need for additional funds arises, including lines of credit at multiple financial institutions and access to the FRB discount window.

As of December 31, 2024, the Company pledged $7.43 billion of loans with the FHLB and FRB to enhance the Company’s borrowing capacity, which included collateral pledged to the FHLB to obtain a municipal letter of credit to collateralize certain municipal deposits.

The Company also pledged $1.15 billion of securities with the FHLB and FRB to secure borrowings, enhance borrowing capacity, collateralize its repurchase agreements, and for other purposes required by law.

The Company had $848.6 million of term advances from the FHLB as of December 31, 2023, as compared to $1.21 billion at December 31, 2022, reflecting a shift in funding mix to deposits.

As of December 31, 2023, the Company had no overnight borrowings from the FHLB and no outstanding borrowings from the FRB discount window or the BTFP.

The Company also pledged $1.07 billion of securities to secure borrowings, enhance borrowing capacity, collateralize its repurchase agreements, and for other purposes required by law.

The Company had $1.07 billion of FHLB advances as compared to $848.6 million at December 31, 2023.

The Company had no outstanding overnight borrowings from the FHLB as of December 31, 2024 and 2023.

The Company’s cash needs for the year ended December 31, 2024 were primarily satisfied by FHLB advances and principal and interest payments on loans and securities and primarily utilized for the reduction of deposits.

The Company’s cash needs for the year ended December 31, 2023 were primarily satisfied by the increase in deposits.

The cash was invested in debt securities, and utilized for the reduction of FHLB advances and loan originations.

The Company’s cash needs for the year ended December 31, 2022 were primarily satisfied by the net proceeds from FHLB advances, principal repayments on debt securities and loans, and proceeds from maturities and calls of debt maturities.

The cash was principally utilized for loan originations, purchases of residential loan pools, purchases of debt securities, dividend payments, and redemption of subordinate debt.

Off-Balance Sheet Commitments and Contractual Obligations

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These commitments are further discussed in Note 13 Commitments, Contingencies and Concentrations of Credit Risk, to the Consolidated Financial Statements.

At December 31, 2023, the Company also had various contractual obligations, which included debt obligations of $1.12 billion, including finance lease obligations of $1.7 million and an additional $20.0 million in operating lease obligations included in other liabilities, and purchase obligations of $82.8 million.

Refer to Note 9 Borrowed Funds and Note 17 Leases to the Consolidated Financial Statements for further discussion of debt obligations and lease obligations, respectively.

At December 31, 2024, the Company also had various contractual obligations, which included debt obligations of $1.33 billion, including finance lease obligations of $1.4 million and an additional $17.1 million in operating lease obligations included in other liabilities, and purchase obligations of $97.2 million Refer to Note 9 Borrowed Funds and Note 17 Leases to the Consolidated Financial Statements for further discussion of debt obligations and lease obligations, respectively.

Purchase obligations represent legally binding and enforceable agreements to purchase goods and services from third parties and consist primarily of contractual obligations under data processing servicing agreements.

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The repurchased shares are held as treasury stock for general corporate purposes.

For the year ended December 31, 2023, the Company did not repurchase any shares of its common stock.

For the year ended December 31, 2024, the Company repurchased 1,383,238 shares of its common stock totaling $21.5 million.

At December 31, 2024, there were 1,551,200 shares available to be repurchased under the authorized stock repurchase program.

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Cash dividends on preferred stock declared and paid during the years ended December 31, 2024 and 2023 were $4.0 million for both periods.

The Company’s ability to continue to pay dividends remains dependent upon capital distributions from the Bank, which may be adversely affected by capital restraints imposed by applicable regulations.

The Company cannot predict whether the Bank will be permitted under applicable regulations to pay a dividend to the Company.

If applicable regulations or regulatory bodies prevent the Bank from paying a dividend to the Company, the Company may not have the liquidity necessary to pay a dividend in the future or pay a dividend at the same rate as historically paid or be able to meet current debt obligations.

The Company’s ability to continue to repurchase shares of common stock and pay dividends remains dependent upon capital distributions from the Bank, which may be adversely affected by capital restraints imposed by applicable regulations.

If applicable regulations or regulatory bodies prevent the Bank from paying a dividend to the Company, the Company may not have the liquidity necessary to repurchase shares of common stock or pay a dividend in the future or pay a dividend at the same rate as historically paid or be able to meet current debt obligations.

Additionally, regulations of the Federal Reserve may prevent the Company from either paying or increasing the cash dividend to common stockholders.

These regulatory policies may affect the ability of the Parent Company to pay dividends, repurchase shares of common stock, or otherwise engage in capital distributions.

Capital Management

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Note 1 Summary of Significant Accounting Policies to the Company’s Audited Consolidated Financial Statements for the year ended December 31, 2024 contains a summary of significant accounting policies.

Various elements of these accounting

policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments.

Various elements of these accounting policies, by their nature, are subject to estimation techniques, valuation assumptions and other subjective assessments.

Certain assets are carried on the consolidated statements of financial condition at estimated fair value or the lower of cost or estimated fair value.

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The critical accounting policy and its application is reviewed periodically, and at least annually, with the Audit Committee of the Board of Directors.

The Company adopted Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326).

Allowance for credit losses in accordance with ASU 2016-13 was a critical accounting policy in the preparation of the consolidated financial statements as of and for the period ended December 31, 2023.

Allowance for credit losses in accordance with Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326), was a critical accounting policy in the preparation of the consolidated financial statements as of and for the period ended December 31, 2024.

Goodwill in accordance with ASC 350, Intangibles - Goodwill and Other, was a critical accounting estimate in the preparation of the consolidated financial statements as of and for the period ended December 31, 2024.

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Alternative loss calculation methods, such as vintage and migration methodologies, limit observable data to closed pools of loans, which excludes performance data from the historical loss rate calculation.

Macro-economic forecasts used in the quantitative analysis are provided by a leader in global forecasting.

Macro-economic forecasts used in the quantitative analysis are provided by a third-party leader in global forecasting.

The Company uses the base case macro-economic forecast to reflect the consensus view of future economic conditions.

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Prepayment and forward interest rate projections are also assumptions used in the quantitative model subject to estimation.

These assumptions are consistent with the assumptions employed by the Company’s Interest Rate Risk (“IRR”) model.

These assumptions are consistent with the assumptions evaluated in the Company’s Interest Rate Risk (“IRR”) model.

Changes in these assumptions have varying implications to the ACL measurement.

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Unique factors are identified, assessed, and documented in the quarter they are applied.

The Company incorporated unique factors in 2023 to address macro-economic uncertainty and alternative economic forecast projections.

Since 2022, the Company incorporated unique factors to address macro-economic uncertainty and alternative economic forecast projections.

Although management believes that it uses the best information available to establish the ACL in conformity with generally accepted accounting principles (“GAAP”), future adjustments to the ACL may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

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If the results of the qualitative assessment indicate that it is not more likely than not that an impairment has occurred, or if the quantitative impairment test results in a fair value of the Company that is greater than the carrying amount, then no impairment charge is recorded.

As of the annual impairment testing date of August 31, 2023, the Company bypassed the qualitative assessment and proceeded directly to the quantitative impairment test based on the stock price of the Company on the measurement date and economic uncertainty and market volatility impacting the banking sector.

As of the annual impairment testing date of August 31, 2024, the Company bypassed the qualitative assessment and proceeded directly to the quantitative impairment test based on the stock price of the Company on the measurement date and economic uncertainty.

To perform the quantitative assessment, the Company engaged a third-party service provider to assist management with the determination of the fair value of the Company.

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 Company estimated fair value of equity using the market capitalization method of the market approach, consideration of initiatives unknown by the market and evaluation of any implied control premium.

Management further supported the conclusions by assessing a combination of an income valuation methodology, comprising a discounted cash flow analysis and market valuation methodologies, comprising the guideline public company and guideline merged and acquired company methods.

The market capitalization method calculated the aggregate market value of the Company based on the total number of outstanding shares of common and preferred stock and the market prices of the shares as of the assessment date.

The Company evaluated conditions that were unknown by the market as of the assessment date and how a market participant would evaluate an implied control premium for the Company.

The implied control premium was supported using a discounted cash flow analysis that contemplated the present value of assumed market participant cost savings and synergies.

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.

A DCF analysis requires significant judgment to model financial forecasts, which included loan and deposit growth, income on securities, forward interest rates, 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, though not substantially, which resulted in no impairment loss at August 31, 2023.

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

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

The market approach for guideline merged and acquired company method utilizes observable transactions of actual prices paid for target companies that operated in comparable industries or markets facing similar risks.

Both methods of the market approach require judgment in the selection of comparable companies or comparable transactions 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, which resulted in no impairment loss at August 31, 2024.

Management continued to carefully assess and evaluate all available information for potential triggering events after the August 31 annual testing date and through December 31, 2024.

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Accounting Pronouncements Adopted in 2024

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 troubled debt restructuring (“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 on January 1, 2023, 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 London Inter-Bank Offered Rate (“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 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.

Recent Accounting Pronouncements Not Yet Adopted

In June 2022, FASB issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”.

In June 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”.

The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

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In addition, this update introduces new disclosure requirements to provide information about the contractual sales restriction including the nature and remaining duration of the restriction.

This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2023.

Early adoption is permitted.

The Company does not expect this standard to have a material impact to the consolidated financial statements.

This update is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2023.

The Company adopted this standard in 2024.

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

In March 2023, FASB issued ASU 2023-02, “Investments - Equity Method and Joint Venture (Topic 323):

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The amendments in this ASU permit reporting entities to account for the tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method.

This update will be effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2023.

This update is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2023.

The Company adopted this standard in 2024.

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

In November 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

The amendments in this ASU require improved reportable segment information on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses.

This update will be effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company does not expect this standard to have a material impact to the consolidated financial statements.

The Company adopted this standard in 2024.

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

Recent Accounting Pronouncements Not Yet Adopted

In August 2023, FASB issued ASU 2023-05, “Business Combinations - Joint Venture Formations (Subtopic 805-60):

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Early adoption is permitted.

The Company does not expect this standard to have a material impact to the consolidated financial statements.

In November 2023, FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

The amendments in this ASU require improved reportable segment information on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses.

This update will be effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on the consolidated financial statements.

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

In December 2023, FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures”.

The amendments in the this ASU require improved annual income tax disclosures surrounding rate reconciliation, income taxes paid, and other disclosures.

The amendments in this ASU require improved annual income tax disclosures surrounding rate reconciliation, income taxes paid, and other disclosures.

This update will be effective for financial statements issued for fiscal years beginning after December 15, 2024.

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The Company is currently evaluating the impact of this standard on the consolidated financial statements.

In November 2024, FASB issued ASU 2024-03 “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)”.

The amendments in this ASU require expanded disclosure and disaggregation of certain costs and expenses including, but not limited to, purchases of inventory, employee compensation, depreciation, depletion, and amortization.

This update will be effective for financial statements issued for fiscal years beginning after December 15, 2026, and interim periods for fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on the consolidated financial statements.

In November 2024, FASB issued ASU 2024-04, “Debt - Debt with Conversion and Other Options (Subtopic 470-20)”.

The amendments in this ASU clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion.

This update will be effective for financial statements issued for fiscal years beginning after December 15, 2025, and interim periods for fiscal years beginning after December 15, 2026.

Early adoption is permitted.

The Company is currently evaluating the impact of this standard on the consolidated financial statements.

Impact of Inflation and Changing Prices

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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 7. Management’s Discussion and Analysis