OCEANFIRST FINANCIAL CORP 10-K

Item 1. Business General OceanFirst Financial Corp. (the “Company”) is incorporated under Delaware law and serves as the holding company for OceanFirst Bank N.A. (the “Bank”). At December 31, 2024, the Company had consolidated total assets of $13.4 billion and total stockholders’ equity of $1.7 billion. The Company is subject to regulation by the Board of Governors of the Federal Reserve System (the “FRB”) and the Securities and Exchange Commission (the “SEC”). The Bank is primarily subject to regulation and supervision by the Office of the Comptroller of the Currency (the “OCC”), as well as the Consumer Financial Protection Bureau (the “CFPB”) due to the Bank having in excess of $10 billion in assets. The Bank is also subject to regulation and supervision by the Federal Deposit Insurance Corporation (the “FDIC”), as the deposit insurer. Currently, the Company transacts the vast majority of its business through the Bank, its wholly owned subsidiary. The Bank’s principal business is originating loans, consisting of commercial real estate and other commercial loans, which have become a key focus of the Bank, and single-family, owner-occupied residential mortgage loans. The Bank also invests in other types of loans, including residential construction and consumer loans. The Bank primarily funds these loans by attracting retail and commercial deposits. In addition, the Bank invests in mortgage-backed securities (“MBS”), securities issued by the U.S. Government and agencies thereof, corporate securities and other investments permitted by applicable law and regulations. The Bank’s revenues are derived principally from interest on its loans, and to a lesser extent, interest on its debt and equity securities. The Bank also receives income from other products and services it offers including bankcard services, trust and fiduciary services, deposit account services, mortgage banking activity, and commercial loan swap income. The Bank’s primary sources of funds are deposits, principal and interest payments on loans and investments, Federal Home Loan Bank (“FHLB”) advances, and other borrowings. While scheduled payments on loans and securities are predictable sources of funds, deposit flows, loan prepayments, and loan and investment activity are greatly influenced by changes in market interest rates, competition, general economic conditions, including levels of unemployment and real estate values, and inflation. The Company’s website address is www.oceanfirst.com . The Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge through its website, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The Company’s website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. Forward-Looking Statements In addition to historical information, this Form 10-K may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which are based on certain assumptions and describe future plans, strategies and expectations of the Company. These forward-looking statements are generally identified by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “will,” “should,” “may,” “view,” “opportunity,” “potential,” or similar expressions or expressions of confidence. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, those items discussed under Item 1A. Risk Factors herein and the following: changes in interest rates and inflation that reduce our margins and yields, the fair value of financial instruments, the level of loan originations or prepayments on loans we have made and make, the level of loan sales and the cost we pay to retain and attract deposits and secure other types of funding; general economic conditions, including potential recessionary conditions, levels of unemployment in the Company’s lending area, real estate market values in the Company’s lending area, potential goodwill impairment, natural disasters, potential increases to flood insurance premiums, the current or anticipated impact of military conflict, terrorism or other geopolitical events, the imposition of tariffs or other domestic or international governmental policies impacting the value of the products of our borrowers, the level of prepayments on loans and mortgage-backed securities, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve System, the quality or composition of the loan or investment portfolios, deposit flows, the availability of low-cost funding, changes in liquidity, including the size and composition of the Company’s deposit portfolio, and the percentage of uninsured deposits in the portfolio, changes in capital management and balance sheet strategies and the ability to successfully implement such strategies, our ability to enter new markets successfully and capitalize on growth opportunities; our ability to 3 successfully expand our franchise, including acquisitions or establishing new offices at favorable prices; our ability to successfully integrate any assets, liabilities, customers, systems and management personnel we have acquired or may acquire into our operations and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto, competition, demand for loans and financial services in the Company’s market area, changes in consumer spending, borrowing and saving habits, changes in accounting principles, a failure in or breach of the Company’s operational or security systems or infrastructure, including cyberattacks, the failure to maintain current technologies, failure to retain or attract employees, the impact of pandemics on our operations and financial results and those of our customers and the Bank’s ability to successfully integrate acquired operations. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. Market Area and Competition The Bank is a regional community bank offering a wide variety of financial products and services to meet the needs of customers in the communities it serves. At December 31, 2024, the Bank primarily operated its business through its headquarters located in Toms River, New Jersey, its administrative office located in Red Bank, New Jersey and 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. One of the largest and oldest financial institutions in New Jersey, the Bank’s headquarters are approximately midway between New York City and Philadelphia. The economy in the Bank’s primary market area, which represents central and southern New Jersey, is based on a mixture of service and retail trade, with other empl oyment provided by a variety of wholesale trade, manufacturing, federal, state and local government, hospitals and utilities. The area is home to commuters working in and around New York City and Philadelphia and also includes a significant number of vacation and second homes in the communities along the New Jersey shore. In addition, the Bank provides banking services through teams located in the major metropolitan markets between Massachusetts and Virginia. The Bank’s future growth opportunities will be influenced by the growth and stability of its geographic marketplace and the competitive environment. The Bank faces significant competition in making loans and attracting deposits. In addition, rapid technological changes and consumer preferences will continue to result in increased competition for the Bank’s digital services as a number of well-funded technology-focused companies are innovating in the payments, distributed ledger, and cryptocurrency networks to disintermediate portions of the traditional banking model. The states of New Jersey, New York City, Philadelphia, Pittsburgh, Baltimore, Boston, Virginia and Washington D.C. are also attractive markets to many financial institu tions. Many of the Bank’s competitors are significantly larger institutions that have greater financial resources than the Bank. The Bank’s competition for loans comes principally from commercial banks, savings banks, savings and loan associations, credit unions, mortgage banking companies, internet-based providers, insurance companies, private lenders, and government sponsored enterprises. Its most direct competition for deposits has historically come from commercial banks, savings banks, savings and loan associations, and credit unions. The Bank also faces competition for deposits from short-term money market funds, other corporate and government securities funds, internet-only providers, and from other financial service institutions such as brokerage firms and insurance companies. The Bank distinguishes itself from large bank competitors with teams of local financial experts in each market providing personalized accounts, extraordinary customer service and local decision-making. Community Involvement The Bank promotes efforts to enhance the quality of life in the communities it serves through employee volunteer efforts and the work of OceanFirst Foundation (the “Foundation”). Employees are encouraged to help their neighbors in many ways and receive up to eight hours of Bank-paid volunteer time each year. The Company’s employees, known as the WaveMakers when helping in the community, collectively spend thousands of hours volunteering and serving in leadership roles with local nonprofit organizations, along with participating in other activities that contribute to improving the quality of life for others. In 2024, the WaveMakers spent nearly 6,000 hours volunteering their time and talents to help neighbors in need and the second annual Bank-wide volunteering event was held in September 2024 with more than 700 employees completing over 70 projects for non-profit organization partners in the five states served by the Bank. The Foundation, established in 1996 during the Company’s initial public offering, has granted over $49.6 million to enrich the lives of local citizens by supporting initiatives in health and human services, education, affordab le housing, youth development, and the arts. 4 Lending Activities Loan Portfolio Composition . At December 31, 2024, the Bank had total loans outstanding of $10.14 billion, of which $5.29 billion, or 52.2% of total loans, were investor owned commercial real estate, multi-family, construction (including residential development loans), (collectively, “commercial real estate - investor”). The remainder of the portfolio consisted of $902.2 million of commercial real estate - owner occupied, or 8.9% of total loans; $647.9 million of commercial and industrial loans, or 6.4% of total loans; $3.07 billion of residential real estate loans, or 30.3% of total loans; and $230.5 million of consumer loans, primarily home equity loans and lines of credit, or 2.3% of total loans. At December 31, 2024, the Bank had $21.2 million of loans held-for-sale. Additionally, at December 31, 2024, 43.3% of the Bank’s total loans had adjustable interest rates. The types of loans that the Bank may originate are subject to federal and state laws and regulations. Interest rates charged by the Bank on loans are affected by the demand for such loans and the supply of money available for lending purposes and the rates offered by competitors. These factors are, in turn, affected by, among other things, economic conditions, monetary policies of the federal government, including the FRB, and legislative and tax policies . The following table sets forth the composition of the Bank’s loan portfolio in dollar amounts and as a percentage of the portfolio at the dates indicated: At December 31, 2024 2023 2022 Amount Percent of Total Amount Percent of Total Amount Percent of Total (dollars in thousands) Commercial real estate - investor $ 5,287,683 52.2 % $ 5,353,974 52.5 % $ 5,171,952 52.1 % Commercial real estate - owner occupied 902,219 8.9 943,891 9.3 997,367 10.1 Commercial and industrial 647,945 6.4 666,532 6.5 622,372 6.3 Residential real estate 3,070,974 30.3 2,984,700 29.3 2,862,681 28.9 Consumer (1) 230,462 2.3 250,664 2.5 264,372 2.7 Total loans 10,139,283 100.0 % 10,199,761 100.0 % 9,918,744 100.0 % Deferred origination costs (fees), net 10,964 9,263 7,488 Allowance for loan credit losses (73,607) (67,137) (56,824) Loans receivable, net 10,076,640 10,141,887 9,869,408 Less: Loans held for sale 21,211 5,166 690 Total loans receivable, net $ 10,055,429 $ 10,136,721 $ 9,868,718 Total loans: Fixed rate $ 5,752,078 56.7 % $ 5,696,173 55.9 % $ 5,760,562 58.1 % Adjustable rate 4,387,205 43.3 4,503,588 44.2 4,158,182 41.9 $ 10,139,283 100.0 % $ 10,199,761 100.0 % $ 9,918,744 100.0 % (1) Consists primarily of home equity loans, home equity lines of credit, student loans, and, to a lesser extent, loans on savings accounts and overdraft lines of credit. 5 Loan Maturity . The following table shows the contractual maturity of the Bank’s total loans at December 31, 2024. The table does not include principal prepayments: At December 31, 2024 Commercial Real Estate - Investor Commercial Real Estate - Owner Occupied Commercial and Industrial Residential Real Estate Consumer Total Loans Receivable (in thousands) One year or less $ 1,222,562 $ 84,559 $ 135,582 $ 5,629 $ 22,772 $ 1,471,104 After one year: More than one year to five years 2,360,100 503,999 427,468 23,664 36,493 3,351,724 More than five years to fifteen years 1,691,187 292,931 64,148 257,445 95,637 2,401,348 More than fifteen years 13,834 20,730 20,747 2,784,236 75,560 2,915,107 Total due after December 31, 2025 4,065,121 817,660 512,363 3,065,345 207,690 8,668,179 Total amount due $ 5,287,683 $ 902,219 $ 647,945 $ 3,070,974 $ 230,462 10,139,283 Deferred origination costs (fees), net 10,964 Allowance for loan credit losses (73,607) Loans receivable, net $ 10,076,640 Less: loans held-for-sale 21,211 Total loans receivable, net $ 10,055,429 The following table sets forth at December 31, 2024, the dollar amount of total loans receivable, contractually due after December 31, 2025, and whether such loans have fixed or adjustable interest rates: Due After December 31, 2025 Fixed Adjustable Total (in thousands) Commercial real estate - investor $ 1,755,785 $ 2,309,336 $ 4,065,121 Commercial real estate - owner occupied 370,304 447,356 817,660 Commercial and industrial 250,581 261,782 512,363 Residential real estate 2,748,964 316,381 3,065,345 Consumer 125,150 82,540 207,690 Total loans receivable $ 5,250,784 $ 3,417,395 $ 8,668,179 Commercial Real Estate - Investor Owned . At December 31, 2024, the Bank’s total investor owned commercial real estate loans outstanding were $5.29 billion, or 52.2% of total loans, as compared to $5.35 billion, or 52.5% of total loans at December 31, 2023. Th e Bank originates investor owned commercial real estate loans that are secured by properties, or properties under construction, that are generally used for busin ess purposes such as office, industrial, multi-family, or retail facilities. A substantial majority of the Bank’s investor owned commercial real estate loans are located in its primary market area. 6 The following tables present total commercial real estate - investor loans by industry and geography (generally based on location of collateral) as of December 31, 2024: Investor Owned (dollars in thousands) Amount Percent of Total Office $ 1,056,252 23 % Retail 1,024,903 23 Multi-family 888,077 20 Industrial/warehouse 694,694 15 Hospitality 176,894 4 Other (1) 697,757 15 Total $ 4,538,577 100 % Construction 749,106 Total CRE investor owned and construction $ 5,287,683 (1) Includes underlying co-operatives, single purpose, stores and some living units / mixed use, investor owned 1-4 family, land / development, and other. Investor Owned (dollars in thousands) Amount Percent of Total New Jersey $ 1,170,596 26 % New York 1,457,747 32 Pennsylvania and Delaware 1,217,349 27 Maryland and District of Columbia 140,833 3 Massachusetts 126,454 3 Other 425,598 9 Total $ 4,538,577 100 % Construction 749,106 Total CRE investor owned and construction $ 5,287,683 The Bank originates investor owned commercial real estate loans with adjustable rates and with fixed interest rates for a period that generally does not exceed ten years, and generally have an amortization schedule up to 25 years and up to 30 years for multi-family properties. As a result, the typical amortization schedule will result in a substantial principal payment upon maturity. The Bank generally underwrites investor owned commercial real estate loans to a maximum of 65% to 80% advance, depending on the asset class, against either the appraised value of the property or its purchase price (for loans to fund the acquisition of real estate), whichever is less. The Bank generally requires minimum debt service coverage of 1.20x to 1.50x for investor owned real estate, depending on the asset class. There is a potential risk that the borrower may be unable to pay off or refinance the outstanding balance at the loan maturity date. The Bank typically lends in its primary markets to experienced owners or developers who have knowledge and expertise in the commercial real estate market. The Bank performs extensive due diligence in underwriting investor owned commercial real estate loans due to the larger loan amounts and the riskier nature of such loans. The Bank assesses and mitigates the risk in several ways, including inspection of all such properties and the review of the overall financial condition of the borrower and guarantors, which include, for example, the review of the rent rolls and applicable leases/lease terms and conditions and the verification of income. A tenant analysis and market analysis are part of the underwriting. Depending on the size of the relationship, financial statements are also required annually for review. For investor owned commercial real estate loans, rent rolls are also required annually in addition to financial statements. Generally, investor owned commercial real estate loans are supported by full or partial personal guarantees by the principals. Generally, for investor owned commercial real estate loans in excess of $750,000, the Bank requires environmental professionals to inspect the property and ascertain any potential environmental risks. In accordance with regulatory guidelines, 7 the Bank requires a full independent appraisal for commercial real estate properties for loans in excess of $500,000. The appraiser must be selected from the Bank’s approved appraiser list. The Bank generally uses an independent third party to review all applicable property appraisals to ensure compliance with regulations. The Bank also originates multi-family mortgage loans. The underwriting standards and procedures that are used to underwrite investor owned commercial real estate loans are used to underwrite multi-family loans, except the loan-to-value ratio generally do not exceed 75% of the appraised value of the property, the debt-service coverage is generally a minimum of 1.20x and an amortization period of up to 30 years may be used. Additionally, the Bank offers an interest rate swap program that allows commercial loan customers to effectively convert an adjustable-rate commercial loan agreement to a fixed-rate commercial loan agreement. The Bank simultaneously sells an offsetting back-to-back swap to an investment-grade national bank so that it does not retain this fixed-rate risk. As of December 31, 2024, these back-to-back swaps had a notional amount of $1.47 billion. The investor owned commercial real estate portfolio also includes loans for the construction of commercial properties. The Bank generally underwrites construction loans for a term of three years or less. The majority of the Bank’s construction loans are floating-rate loans with a maximum 75% loan-to-value ratio for the completed project and a minimum debt-service coverage of 1.0x during the construction period to ensure there is sufficient interest reserve to cover interest payments. The expectation is that the underlying project when complete will produce a debt service coverage ratio that is consistent with policy for completed income producing projects. Additionally, at the time of initial analysis, the Bank generally underwrites construction loans at a higher interest rate than current market rates. The Bank may commit to provide permanent mortgage financing on its construction loans on income-producing property. Risk of loss on a construction loan depends largely upon whether the initial estimate of the property's value at completion of construction equals or exceeds the cost of the property construction (including interest). During the construction phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed. The Bank generally mitigates these risks by (i) requiring an independent appraisal, which includes information on market rents and/or comparable sales for competing projects; (ii) making advances on construction loans in accordance with a schedule reflecting the cost of the improvements and performing site inspections to determine if the work has been completed prior to the advancement of funds for the project; and (iii) pre-sale or pre-leasing requirements and phasing of construction. Investor owned commercial real estate loans are among the largest of the Bank’s loans and may have higher credit risk and lending spreads. Because repayment is often dependent on the successful management of the properties, repayment of commercial real estate loans may be affected by adverse conditions in the real estate market or the economy, as a result, the Bank is particularly vigilant of this portfolio. The Bank believes this portfolio is highly diversified with loans secured by a variety of property types and the portfolio exhibits stable credit quality. The commercial real estate - investor-owned portfolio composition as of December 31, 2024 is as follows: At December 31, 2024 (dollars in thousands) Amount Percent of total Weighted Average LTV (1) Weighted Average Debt Service Coverage Ratio (2) Office $ 515,610 11 % 50 % 1.9x Medical 281,623 6 57 1.6 Credit Tenant (3) 259,019 6 65 1.5 Total Office (4) 1,056,252 23 55 1.8 Retail 1,024,903 23 53 2.0 Multi-family (5) 888,077 20 63 1.6 Industrial/warehouse 694,694 15 50 2.1 Hospitality 176,894 4 47 2.0 Other (6) 697,757 15 45 1.8 Total investor owned 4,538,577 100 % 54 1.9 Construction 749,106 Total CRE investor owned and construction $ 5,287,683 8 (1) Represents the weighted average of loan balances as of December 31, 2024 divided by their most recent appraisal value, which is generally obtained at the time of origination. (2) Represents the weighted average of net operating income on the property before debt service divided by the loan’s respective annual debt service based on the most recent credit review of the borrower. (3) Represents tenants which were awarded an investment grade rating based on size and financial strength. Investment grade is defined as a credit rating of BBB- or higher by Standard & Poor’s or Baa3 or higher by Moody’s. (4) Central business district (“CBD”) exposure represented $118 million, or 11.2%, of the total office loan balance at December 31, 2024. Office CBD loans had a weighted average LTV of 54% and weighted average debt service coverage ratio of 1.9x at December 31, 2024. $85 million, or 72%, of the total office CBD exposure are to credit tenants, life sciences and medical borrowers at December 31, 2024. New York City office CBD loans represented $7 million, or 0.05% of the Company’s total assets at December 31, 2024. (5) New York City rent-regulated multi-family loans, where the property has more than 50% of its units rent-regulated, represented $31 million, or 0.23% of the Company’s total assets at December 31, 2024. (6) Other includes underlying co-operatives, single purpose, stores and some living units / mixed use, investor owned 1-4 family, land / development, and other. Commercial and Industrial (“C&I”) and Commercial Real Estate - Owner Occupied . At December 31, 2024, C&I loans totaled $647.9 million, or 6.4% of the Bank’s total loans outstanding, compared to $666.5 million, or 6.5% of total loans at December 31, 2023. The Bank originates C&I loans and lines of credit (including for working capital, fixed asset purchases, and acquisition, receivable, and inventory financing) primarily in the Bank’s market area. In certain instances, the Bank also purchases commercial and industrial loans through existing third-party channels. In underwriting C&I loans and credit lines, the Bank reviews and analyzes the financial history and capacity of the borrower, collateral value, financial strength and character of the principal borrowers, and general payment history of the principal borrowers in coming to a credit decision. The Bank generally originates C&I loans secured by the assets of the business including accounts receivable, inventory, equipment, and fixtures. The Bank generally requires the personal guarantee of the principal borrowers for all C&I loans. The risk of loss on a C&I business loan is dependent largely on the borrower’s ability to repay the loan from the ongoing operations of the business. In addition, any collateral securing such loans may depreciate over time, may be difficult to appraise, and may fluctuate in value. Typically, financial covenants are included in the loan structure which may include balance sheet leverage, cash flow leverage, liquidity requirements; debt service coverage, and/ or fixed charge coverage. Requirements may differ based on loan size, industry, facility types, capital stack, and years in business. As of December 31, 2024, commercial real estate - owner occupied loans totaled $902.2 million or 8.9% of the total loans, as compared to $943.9 million, or 9.3% of total loans at December 31, 2023. A substantial majority of the Bank’s owner occupied commercial real estate loans are located in its primary market area. The following tables present total commercial real estate - owner occupied loans by industry and geography (based on location of collateral) as of December 31, 2024: Owner Occupied (dollars in thousands) Amount Percent of Total Office $ 130,282 14 % Retail 139,541 15 Industrial/warehouse 227,418 25 Hospitality 60,398 7 Other (1) 344,580 38 Total $ 902,219 100 % (1) Includes underlying single purpose, mixed use, and other. 9 Owner Occupied (dollars in thousands) Amount Percent of Total New Jersey $ 412,924 46 % New York 135,401 15 Pennsylvania and Delaware 236,432 26 Other 117,462 13 Total $ 902,219 100 % An owner occupied property is defined as real estate used by a business for its operations. To be considered owner occupied, the underlying business must either occupy 51% of the building’s total square footage or pay 51% of the total market rate rental income derived from the property. Given that the repayment is generally dependent on the ongoing operations of the underlying business with similar risk of a C&I loan, the Bank reviews and analyzes the financial history and capacity of the operating business in addition to the real estate collateral value. The bank generally requires the corporate guarantee of the operating business, if not a direct borrower. The Bank primarily underwrites owner occupied real estate loans to a maximum of 70% to 80% advance, depending on the property type, against either the appraised value of the property or its purchase price (for loans to fund the acquisition of real estate), whichever is less. The Bank generally requires minimum debt service coverage of 1.25x to 1.40x for owner occupied real estate, depending on the property type. There is a potential risk that the borrower may be unable to pay off or refinance the outstanding balance at the loan maturity date. Generally, for owner occupied commercial real estate loans in excess of $750,000, the Bank requires environmental professionals to inspect the property and ascertain any potential environmental risks. In accordance with regulatory guidelines, the Bank requires a full independent appraisal for commercial real estate properties for loans in excess of $500,000. The appraiser must be selected from the Bank’s approved appraiser list. The Bank generally uses an independent third party to review all applicable property appraisals to ensure compliance with regulations. Generally, depending on the size of the loan and relationship, financial statements are also required annually for review of C&I and owner occupied commercial real estate loans. Residential Real Estate . The Bank offers both fixed-rate and adjustable-rate mortgage (“ARM”) loans secured by one-to-four family residences with maturities up to 30 years. The majority of such loans are secured by property located in the Bank’s primary market area. Loan originations are typically generated by the Bank’s commissioned loan representatives and are largely derived from contacts within the local real estate industry, members of the local communities, the Bank’s existing or past customers, and targeted advertising through digital channels. At December 31, 2024, $3.07 billion, or 30.3% of total loans, were residential real estate loans, primarily single family and owner occupied. To a lesser extent, and included in this activity, are residential mortgage loans secured by seasonal second homes, non-owner occupied investment properties and construction loans. The average size of the Bank’s residential real estate loans was approximately $350,000 at December 31, 2024. The Bank currently offers several ARM loan programs with interest rates that adjust between annually to ten years, as well as loans that operate as fixed-rate loans at their onset and later convert to an ARM for the remainder of the term. These loans have periodic and overall caps on the increase or decrease at any adjustment date and over the life of the loan. These loans are indexed to an applicable Secured Overnight Financing Rate (“SOFR”) rate or U.S Treasury plus a spread. The majority of the ARM portfolio is tied to the one-year U.S. Treasury bill. Adjustments are generally based on a spread between 2.75% and 3.25%. Generally, the maximum interest rate on these loans is 6% above the initial interest rate. Generally, ARM loans pose credit risks different than the risks inherent in fixed-rate loans, primarily because as interest rates rise, the payments of the borrower rise, thereby increasing the potential for delinquency and default. At the same time, the marketability of the underlying property may be adversely affected by higher interest rates. In order to minimize risks, borrowers of ARM loans with an initial fixed period of five years or less must qualify based on the greater of the note rate plus 2% or the fully-indexed rate. Seven- to ten-year ARM loans must qualify based on the note rate. The Bank does not originate ARM loans that can result in negative amortization. The Bank’s fixed-rate mortgage loans are currently made for terms from ten to 30 years. The Bank either holds its residential loans for its portfolio or sells a portion of its loans to either government sponsored enterprises such as the FHLB, Freddie Mac or Fannie Mae, or to a third party aggregator. During 2024, the Company sold $267.8 million of loans with a related gain on 10 sale of loans for $2.4 million for the year ended December 31, 2024. The talent acquisition of Garden State Home Loans, Inc. during 2024, enhanced the Company’s mortgage loan sale activity. In certain loan sales, the Company will retain servicing rights, otherwise servicing rights may be sold as part of the loan sale. The retention of fixed-rate mortgage loans may increase the level of interest rate risk exposure of the Bank, as the rates on these loans will not adjust during periods of rising interest rates and the loans can be subject to substantial increases in prepayments during periods of falling interest rates. The Bank’s policy is to originate residential real estate loans in amounts up to 80% of the lower of the appraised value or the selling price of the property securing the loan, up to 95% of the appraised value or selling price if private mortgage insurance is obtained, and up to 97% of the lower of the appraised value or selling price if the borrower qualifies for the NeighborFirst or special purpose credit program available to certain census tracts. Appraisals are obtained for loans secured by real estate properties. The weighted average loan-to-value ratio of the Bank’s residential real estate loans, excluding loan purchase pools, was 59% at December 31, 2024 based on appraisal values at the time of origination. Title insurance is typically required for first mortgage loans. Residential mortgage loans originated by the Bank include due-on-sale clauses which provide the Bank with the contractual right to declare the loan immediately due and payable in the event the borrower transfers ownership of the property without the Bank’s consent. Due-on-sale clauses are an important means of adjusting the rates on the Bank’s fixed-rate residential mortgage loan portfolio and the Bank has generally exercised its rights under these clauses. The Bank has made, and may continue to make, residential mortgage loans that will not qualify as Qualified Mortgage Loans under the Dodd-Frank Act and the CFPB regulations. See Risk Factors – Risks Related to Lending Activities – The Dodd-Frank Act imposes obligations on originators of residential mortgage loans . Included in the Bank’s residential real estate loan balance at December 31, 2024, were residential construction loans which totaled $93.6 million. The Bank originates residential construction loans primarily on a construction to permanent basis with such loans converting to an amortizing loan following the completion of the construction phase. All of the Bank’s residential construction loans are made to individuals building a residence. Construction lending, by its nature, entails additional risks compared to residential real estate lending, attributable primarily to the fact that funds are advanced based upon a security interest in a project which is not yet complete. The risk of loss on a construction loan depends largely upon whether the initial estimate of the property's value at completion of construction equals or exceeds the cost of the property construction. During the construction phase, a number of factors can result in delays and cost overruns. If estimates of value are inaccurate or if actual construction costs exceed estimates, the value of the property securing the loan may be insufficient to ensure full repayment when completed. The Bank addresses these risks through its underwriting policies and procedures and its experienced staff. Home Equity Loans and Lines, Student Loans and Other Consumer . At December 31, 2024, th e Bank’s consumer loans totaled $230.5 million, or 2.3% of the Bank’s total loan portfolio. Of the total consumer loan portfolio, home equity loans comprised $106.5 million; home equity lines of credit comprised $84.6 million; and student loans comprised $15.9 million. The Bank originates home equity loans typically as fixed-rate loans with terms ranging from five to 20 years. The Bank also offers variable-rate home equity lines of credit. Home equity loans and lines of credit are originated based on the applicant’s income and their ability to repay and are secured by a mortgage on the underlying real estate, typically owner-occupied, one-to-four family residences. Generally, the loan when combined with the balance of any applicable first mortgage lien, may not exceed 80% of the appraised value of the property at the time of the loan commitment. The Bank charges an early termination fee should a home equity loan or line of credit be closed within two or three years of origination. A borrower is required to make minimum monthly payments of principal and interest, based upon a 10-, 15- or 20-year amortization period. Certain home equity lines of credit require the payment of interest-only during the first five years with fully-amortizing payments thereafter. At December 31, 2024, these loans totaled $5.9 million , as compared to $5.7 million at December 31, 2023. Generally, the adjustable rate of interest charged is based upon the prime rate of interest (as published in the Wall Street Journal), although the range of interest rates charged may vary from 1.0% below prime to 1.5% over prime. The loans have an 18% lifetime cap on interest rate adjustments. Consumer loans may entail greater risk than residential real estate loans, particularly in the case of consumer loans that are unsecured or secured by assets that depreciate rapidly. Repossessed collateral for a defaulted consumer loan may not provide an adequate source of repayment for the outstanding loan and a small remaining deficiency often does not warrant further substantial collection efforts against the borrower. Consumer loan collections depend on the borrower’s continuing financial stability and therefore are likely to be adversely affected by various factors, including job loss, divorce, illness, or personal bankruptcy. Furthermore, the application of various federal and state laws, including federal and state bankruptcy, and insolvency laws may limit the amount that can be recovered on such loans. 11 Loan Approval Procedures and Authority . The Loan Committee of the Board of Directors (“Board”) establishes the loan approval policies of the Bank based on total exposure to the individual borrower. The Board has authorized the approval of loans by a minimum of two officers of the Bank or the Management Credit Committee, on a scale which requires approval by personnel with progressively higher levels of credit approval authority as the loan amount increases. Pursuant to applicable regulations, loans to one borrower generally cannot exceed 15% of the Bank’s unimpaired capital. Acquired loans are evaluated under OceanFirst’s credit risk management policies during pre-closing due diligence and during post-closing risk rating reviews. In addition to internal credit reviews, the Bank has engaged independent firms specializing in commercial loan reviews to examine a selection of commercial real estate and commercial and industrial loans and provide management with objective analysis regarding the quality of these loans throughout the year. The independent firms reviewed over 60% of the outstanding loan balances for the Bank’s commercial real estate and commercial and industrial loans during 2024. Their conclusion was that the Bank’s internal credit reviews are consistent with both Bank policy and general industry practice. Loan Servicing . Loan servicing includes collecting and remitting loan payments, accounting for principal and interest, making inspections as required of mortgaged premises, contacting delinquent borrowers, supervising foreclosures and property dispositions in the event of defaults, making certain insurance and tax payments on behalf of the borrowers, and generally administering the loans. The Bank also services mortgage loans for others. Generally, loans currently being serviced for others are loans which were originated by the Bank. At December 31, 2024, the Bank was servicing $191.3 million of loans for others. Delinquencies and Classified Assets . The steps taken by the Bank with respect to delinquencies vary depending on the nature of the loan and period of delinquency. When a borrower fails to make the required payment on a loan, the Bank takes a number of steps to have the borrower cure the delinquency and restore the loan to current status. The Bank sends the borrower a written notice of non-payment after the loan is first past due. In the event payment is not then received, additional letters and phone calls generally are made. The Bank may offer to modify the terms or take other forbearance actions which afford the borrower an opportunity to satisfy the loan terms. If the loan is still not brought current and it becomes necessary for the Bank to take legal action, which typically occurs after a loan is delinquent at least 120 days or more, the Bank will either: (i) commence litigation to acquire the collateral, including foreclosure proceedings against any real property that secures the loan; or (ii) sell eligible non-performing loans where foreclosure proceedings may or may not have been initiated. If a foreclosure action is instituted and the loan is not brought current, paid in full, or an acceptable workout accommodation is not agreed upon before the foreclosure sale, the real property securing the loan generally is sold at foreclosure. Foreclosure timelines in New Jersey are among the longest in the nation and have remained protracted over the past several years. The Bank classifies assets in accordance with its Classification of Assets and Allowance for Credit Losses Policy (the “ACL Policy”), which considers certain regulatory guidelines and definitions. As part of the ACL Policy, the Bank’s Special Asset Group reviews and confirms the criticized and classified commercial loan report monthly. At December 31, 2024, the Bank had $105.3 million of assets, including other real estate owned (“OREO”), classified as Substandard. At December 31, 2023, the Bank had $106.6 million of assets classified as Substandard. Assets which do not currently expose the Bank to sufficient risk to warrant classification but possess potential weaknesses, such as past delinquencies, are designated as Special Mention. Special Mention assets totaled $54.5 million at December 31, 2024, as compared to $40.4 million at December 31, 2023. The increase in special mention loans was primarily due to new downgrades totaling $49.5 million, partly offset by upgrades, payoffs and migrations to substandard during the year ended December 31, 2024. 12 Non-Performing Loans and OREO. The following table sets forth information regarding non-accrual loans (“non-performing loans”), including loans p urchased with credit deterioration (“PCD”), and OREO . The Bank’s PCD loans relate to loans acquired from acquisitions . PCD loans are accounted for at the purchase price or acquisition date fair value, with an estimate of expected credit losse s for groups of PCD loans with similar risk characteristics and individual PCD loans without similar characteristics, to arrive at an initial amortized cost basis. It is the policy of the Bank to cease accruing interest on loans 90 days or more past due or in the process of foreclosure. At December 31, 2024 2023 2022 (dollars in thousands) Non-performing loans (1) $ 35,527 $ 29,548 $ 23,265 OREO 1,811 — — Non-performing loans and assets (1) $ 37,338 $ 29,548 $ 23,265 Allowance for loan credit losses as a percent of total loans receivable (2) 0.73 % 0.66 % 0.57 % Allowance for loan credit losses as a percent of total non-performing loans (1) (2) 207.19 227.21 244.25 Non-performing loans as a percent of total loans receivable (1) 0.35 0.29 0.23 Non-performing assets as a percent of total assets (1) 0.28 0.22 0.18 (1) Non-performing loans consist of all loans 90 days or more past due and other loans in the process of foreclosure. (2) Loans acquired from acquisitions were recorded at fair value. The net unamortized credit and PCD marks on these loans, not reflected in the allowance for loan credit losses, were $6.0 million, $7.5 million, and $11.4 million at December 31, 2024, 2023, and 2022, respectively. Non-performing loans totaled $35.5 million at December 31, 2024, an increase of $6.0 million as compared to December 31, 2023, primarily due to acquired PCD loans from Spring Garden Capital Group, LLC (“Spring Garden”). The Company has OREO assets of $1.8 million and $0 at December 31, 2024, and 2023, respectively. The increase in OREO assets related to the acquisition of Spring Garden. Allowance for Credit Losses (“ACL”): Under the current expected credit loss (“CECL”) model, the ACL on financial assets is a valuation allowance estimated at each balance sheet date in accordance with generally accepted accounting principles (“GAAP”) that is deducted from the financial assets’ amortized cost basis to present the net amount expected to be collected on the financial assets. The CECL model also applies to certain off-balance sheet credit exposures. The Company estimates the loan ACL based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, net deferred fees or costs, collection of cash, and charge-offs. In the event that collection of principal becomes uncertain, the Company has policies in place to write off accrued interest receivable by reversing interest income in a timely manner. Therefore, the Company has made a policy election to exclude accrued interest from the amortized cost basis and therefore excludes it from the measurement of the loan ACL. A description of the methodology used in establishing the ACL is set forth in the section Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies and Estimates, Allowance for Credit Losses . At December 31, 2024 and 2023, the Bank’s loan ACL as a percentage of total loans was 0.73% and 0.66%, respectively. The net unamortized credit and PCD marks on all acquired loans, not reflected in the allowance, was $6.0 million and $7.5 million at December 31, 2024 and 2023, respectively. The loan ACL as a percentage of total non-performing loans was 207.19% and 227.21% at December 31, 2024 and 2023, respectively. The Bank will continue to monitor its allowance for loan credit losses as conditions dictate. 13 The following table sets forth activity in the Bank’s loan ACL for the periods set forth in the table: At or for the Year Ended December 31, 2024 2023 2022 (dollars in thousands) Balance at beginning of year $ 67,137 $ 56,824 $ 48,850 Charge-offs: Commercial real estate - investor (1) 1,659 8,350 8 Commercial real estate - owner occupied — 6 62 Commercial and industrial — 129 60 Residential real estate 76 — 56 Other consumer 485 208 387 Total charge-offs 2,220 8,693 573 Recoveries 665 311 913 Net charge-offs (recoveries) 1,555 8,382 (340) Initial allowance on acquired loans from Spring Garden 2,547 — — Provision for credit losses 5,478 18,695 7,634 Balance at end of year $ 73,607 $ 67,137 $ 56,824 (1) Commercial real estate - investor charge-offs during the year ended December 31, 2024 and 2023 of $1.7 million and $8.4 million, respectively, primarily related to a single commercial relationship which had partial charge-offs. This was resolved via sale of collateral during 2024. The following table sets forth the net charge-offs/recoveries and the percent of net charge-offs/recoveries by loan category to average net loans outstanding for the periods indicated (dollars in thousands): At or for the Year Ended December 31, 2024 2023 2022 Net Charge-offs (Recoveries) Ratio of Net Charge-offs (Recoveries) to Average Loans Net Charge-offs (Recoveries) Ratio of Net Charge-offs (Recoveries) to Average Loans Net (Recoveries)Charge-offs Ratio of Net (Recoveries) Charge-offs to Average Loans Net charge-offs (recoveries): Commercial real estate - investor $ 1,440 0.02 % $ 8,344 0.08 % $ (47) — % Commercial real estate - owner occupied (32) — (8) — (108) — Commercial and industrial (18) — 104 — (95) — Residential real estate (130) — (43) — (100) — Other consumer 295 — (15) — 10 — Total net charge-offs (recoveries) 1,555 0.02 % 8,382 0.08 % (340) — % Average net loans outstanding during the year $ 10,019,531 $ 10,016,859 $ 9,323,619 The net charge-offs for the years ended December 31, 2024 and 2023 were primarily related to the one commercial real estate - investor relationship which was resolved via sale of collateral in 2024. The net recoveries for the year ended December 31, 2022 were primarily due to improved credit quality and successful recovery of previously charged-off balances. 14 The following table sets forth the Bank’s ACL by loan category and its percent to total loan ACL at December 31, 2024, 2023 and 2022, and the percent of loans to total loans in each of the categories listed at the dates indicated (dollars in thousands): At December 31, 2024 2023 2022 ACL Amount Percent of ACL to Total ACL Percent of Loans to Total Loans ACL Amount Percent of ACL to Total ACL Percent of Loans to Total Loans ACL Amount Percent of ACL to Total ACL Percent of Loans to Total Loans Commercial real estate - investor $ 30,780 41.8 % 52.2 % $ 27,899 41.6 % 52.5 % $ 21,070 37.1 % 52.1 % Commercial real estate - owner occupied 3,817 5.2 8.9 4,354 6.5 9.3 4,423 7.8 10.1 Commercial and industrial 10,471 14.2 6.4 6,867 10.2 6.5 5,695 10.0 6.3 Residential real estate 27,587 37.5 30.3 27,029 40.3 29.3 24,530 43.2 28.9 Other consumer 952 1.3 2.3 988 1.5 2.5 1,106 2.0 2.7 Total $ 73,607 100.0 % 100.0 % $ 67,137 100.0 % 100.0 % $ 56,824 100.0 % 100.0 % Investment Activities The Bank views its securities portfolio primarily as a source of income and liquidity. Interest and principal payments generated from securities provide a source of liquidity to fund loans and meet short-term cash needs. The portfolio is also used to provide collateral for qualified deposits and borrowings and to manage interest rate risk. The investment policy is overseen by the Board and generally limits investments to government and federal agency obligations, agency and non-agency mortgage-backed securities, and municipal, corporate, and asset-backed securities. The Company’s investment policy mirrors that of the Bank except that it allows for the purchase of certain other debt, preferred stock, and equity securities in limited amounts. The Board has delegated authority to implement the investment policy to the Company and Bank’s Investment Committees under the oversight of the Asset Liability Committee. Day-to-day management of the portfolio rests with the Treasurer. Classification of securities are determined by management at the time of purchase. If the Bank has the intent and the ability at the time of purchase to hold debt securities until maturity, they may be classified as held-to-maturity. Debt securities identified as held-to-maturity are carried at cost, adjusted for amortization of premium and accretion of discount, which are recognized as adjustments to interest income. Debt securities to be held for indefinite periods of time, but not necessarily to maturity, are classified as available-for-sale. Such debt securities are carried at an estimated fair value and unrealized gains and losses, net of tax effect, are included as a separate component of stockholders’ equity. Refer to Note 4 Securities, to the Consolidated Financial Statements. The majority of the Bank’s residential and commercial mortgage-backed securities are issued or guaranteed by an agency of the U.S. government including Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”), and Government National Mortgage Association (“GNMA”). Agency mortgage-backed securities along with obligations issued directly by the U.S. government and its agencies entail a lesser degree of credit risk than loans made by the Bank and most other securities by virtue of the guarantees that back them; they require less capital under risk-based capital rules, are generally more liquid, and are more easily used to collateralize borrowings or other obligations of the Bank. Each of the U.S. government, agency, and agency guaranteed obligations are rated AA+ by Standard and Poor’s and Aaa by Moody’s. The municipal portfolio provides tax-advantaged yield and diversification of risk and is generally comprised of general obligation and revenue bonds issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways, sewer systems, hospitals, or other critical infrastructure. The asset-backed securities portfolio provides attractive yields and diversification of risk and is largely comprised of senior classes of collateralized loan obligations that invest in U.S. based broadly syndicated and middle market loans. The corporate debt securities portfolio is comprised of U.S. financial services and industrial companies that exhibit strong credit characteristics and provide attractive returns. The Bank may occasionally invest in non-agency residential or commercial mortgage-backed securities that are rated investment grade depending on credit and return on investment profiles. The vast majority of municipal, asset-backed, corporate, and other mortgage-backed securities are issued by entities with current credit ratings by one of the nationally recognized statistical rating organizations that are considered investment grade. See Note 4 Securities, to the Consolidated Financial Statements. 15 The ta ble below sets forth certain information regarding the amortized cost, weighted average yield, and contractual maturities, excluding scheduled principal amortization, of the Bank’s debt securities as of December 31, 2024. The weighted average yield is calculated based on the yield to maturity weighted for the size of each debt security over the entire portfolio of debt securities. The weighted average yields on tax-exempt obligations have been computed on a tax-equivalent basis. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Refer to Note 4 Securities, to the Consolidated Financial Statements, for further discussion on contractual maturities and callable securities. At December 31, 2024 Total One Year or Less Amortized Cost Weighted Average Yield More than One Year to Five Years Amortized Cost Weighted Average Yield More than Five Years to Ten Years Amortized Cost Weighted Average Yield More than Ten Years Amortized Cost Weighted Average Yield Amortized Cost Estimated Fair Value (dollars in thousands) U.S. government and agency obligations $ 7,837 4.55 % $ 45,339 1.18 % $ 9,220 1.62 % $ — — % $ 62,396 $ 57,385 State and municipal debt obligations 24,086 1.82 80,262 1.69 46,192 2.32 50,829 2.97 201,369 187,903 Corporate debt securities (1) 8,685 1.67 49,158 5.98 16,596 5.47 4,953 9.24 79,392 78,032 Asset-backed securities (2) — — 1,000 6.79 141,817 6.66 54,299 6.62 197,116 197,267 Mortgage-backed securities (3) : Agency residential 71 3.42 16,394 2.30 52,549 2.46 1,076,146 4.00 1,145,160 1,072,549 Agency commercial — — 56,515 2.17 63,797 1.99 68,223 4.81 188,535 168,010 Non-agency commercial — — — — — — 20,146 2.44 20,146 19,271 Total mortgage-backed securities $ 71 3.42 % $ 72,909 2.20 % $ 116,346 2.20 % $ 1,164,515 4.02 % $ 1,353,841 $ 1,259,830 Total debt securities $ 40,679 2.32 % $ 248,668 2.61 % $ 330,171 4.28 % $ 1,274,596 4.11 % $ 1,894,114 $ 1,780,417 (1) $47.8 million of the Bank’s corporate debt securities carry interest rates which adjust to a spread over SOFR on a quarterly basis. (2) All of the Bank’s asset-backed securities carry interest rates which adjust to a spread over SOFR on a quarterly basis. (3) $478.3 million of the Bank’s mortgage-backed securities carry interest rates which generally adjust to a spread over SOFR on a quarterly basis. Equity Investments . At December 31, 2024, and 2023, the Company held equity investments of $84.1 million and $100.2 million, respectively. The equity investments are primarily comprised of select financial services institutions’ preferred stocks, investments in other financial institutions and funds. Sources of Funds General . The Bank’s primary sources of funds are deposits, principal and interest payments on loans and investments, FHLB advances, and other borrowings. 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 changes in market interest rates, competition, general economic conditions, including levels of unemployment and real estate values, and inflation. 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. Deposits . The Bank offers a variety of deposit accounts with a range of interest rates and terms to retail, government, and business customers. The Bank’s deposits consist of money market accounts, savings accounts, interest-bearing checking accounts, non-interest-bearing accounts, and time deposits, including brokered deposits. The flow of deposits is influenced significantly by general economic conditions, prevailing interest rates, and competition. The Bank’s deposits are obtained predominantly from the areas in which its branch offices are located, and to a lesser extent, through digital service channels. The Bank relies on its community-banking focus, stressing customer service and long-standing relationships with its customers to attract and retain these deposits; however, market interest rates and rates offered by competing financial institutions could significantly affect the Bank’s ability to attract and retain deposits. The Company’s deposits decreased $368.6 million to $10.07 billion at December 31, 2024, from $10.43 billion in the prior year, primarily related to planned runoff of brokered time deposits, which decreased by $556.8 million, partly offset by increases in retail time deposits of $203.5 million. 16 At December 31, 2024 and 2023, the Bank had $5.75 billion and $5.32 billion, respectively, of total uninsured deposits (in excess of the Federal Deposit Insurance Corporation limit). At December 31, 2024 and 2023, this total included $2.48 billion and $2.31 billion, respectively, of collateralized government deposits, and $1.58 billion and $1.42 billion of intercompany deposits of fully consolidated subsidiaries. Estimated adjusted uninsured deposits excluding these balances represented $1.69 billion and $1.60 billion, or 16.5% and 15.2% of total deposits, as of December 31, 2024 and 2023, respectively. At December 31, 2024, the Bank had $457.2 million in time deposits in amounts of $250,000 or more maturing as follows: Maturity Period Time Deposits Weighted Average Rate (dollars in thousands) Three months or less $ 305,992 4.71 % Over three through six months 109,588 4.11 Over six through twelve months 40,661 3.71 Over twelve months 926 1.65 Total $ 457,167 4.47 % The following table sets forth the distribution of the Bank’s average deposit accounts and the average rate paid on those deposits for the periods indicated: For the Year Ended December 31, 2024 2023 2022 Average Balance Percent of Total Average Deposits Average Rate Paid Average Balance Percent of Total Average Deposits Average Rate Paid Average Balance Percent of Total Average Deposits Average Rate Paid (dollars in thousands) Non-interest-bearing accounts $ 1,630,719 15.9 % — % $ 1,869,735 18.2 % — % $ 2,319,657 23.4 % — % Interest-bearing checking accounts 3,923,846 38.2 2.20 3,795,502 37.0 1.39 4,063,716 41.0 0.28 Money market deposit accounts 1,214,690 11.8 3.45 794,387 7.7 2.35 764,837 7.7 0.29 Savings accounts 1,169,424 11.4 0.98 1,364,333 13.3 0.68 1,597,648 16.1 0.05 Time deposits 2,325,638 22.7 4.40 2,440,829 23.8 3.74 1,167,499 11.8 1.43 Total average deposits $ 10,264,317 100.0 % 2.36 % $ 10,264,786 100.0 % 1.68 % $ 9,913,357 100.0 % 0.31 % Borrowings . The Bank also obtains advances from the FHLB and other sources for cash management and interest rate risk management purposes or as an alternative to deposits. Advances are collateralized primarily by certain of the Bank’s mortgage loans and debt securities and secondarily by the Bank’s investment in capital stock of the FHLB. The maximum amount that the FHLB will advance to member institutions, including the Bank, fluctuates from time to time in accordance with the policies of the FHLB. At December 31, 2024, the Bank had $1.07 billion of outstanding advances from the FHLB. The Bank can also borrow from the Federal Reserve Bank of Philadelphia under its primary credit program. Primary credit is available on a short-term basis, typically overnight, at a rate above the Federal Open Market Committee’s Federal funds target rate. All extensions of credit by the Federal Reserve Bank of Philadelphia must be secured. At December 31, 2024, the Bank had no borrowings outstanding with the Federal Reserve Bank of Philadelphia. As of December 31, 2024, the Company pledged $7.43 billion of loans with the FHLB and the 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 government municipal deposits. At December 31, 2024, the Bank had outstanding municipal letters of credit of $1.45 billion issued by the FHLB used to secure such government deposits. The Company also pledged $1.07 billion of securities with the FHLB and the FRB to secure borrowings, enhance borrowing capacity, collateralize its repurchase agreements, and for other purposes required by law. The Bank also borrows funds using securities sold under agreements to repurchase with customers. Under this form of borrowing specific securities are pledged as collateral to secure the borrowing. These pledged securities are held by a third-party custodian. At December 31, 2024, the Bank had borrowed $60.6 million through securities sold under agreements to repurchase with customers. 17 The Bank has access to the FRB discount window as an additional source of funds. As of December 31, 2024 the Bank had no borrowings outstanding with the FRB discount window. Recent Acquisitions On October 1, 2024, the Company completed the acquisition of Spring Garden. Total consideration paid was $162.7 million and goodwill from the transaction amounted to $17.2 million. The transaction will be complementary to the Company’s existing products and will expand the Company’s specialty finance offerings. The Company’s acquisitions over recent years have enhanced the Company’s position as the premier community banking franchise in central and southern New Jersey, strengthened its presence in the major metropolitan areas of Philadelphia and New York, grown business lines, expanded its geographic footprint, and improved financial performance. The Company will continue to evaluate potential acquisition opportunities to further create stockholder value. Subsidiary Activities At December 31, 2024, the Bank owned all or a majority interest in five direct subsidiaries: • OceanFirst REIT Holdings, Inc., a Delaware corporation, was established in 2007 as a wholly-owned subsidiary of the Bank and now acts as the holding company for OceanFirst Management Corp, a New York corporation, which was organized in 2016 to hold and manage investment securities, including the stock of OceanFirst Realty Corp. OceanFirst Realty Corp., a Delaware corporation, was established in 1997 and invests in qualifying mortgage loans and is intended to qualify as a real estate investment trust, which may, among other things, be utilized by the Company to raise capital in the future. • Casaba Real Estate Holding Corporation, a New Jersey corporation, was acquired by the Bank as a wholly-owned subsidiary as part of its acquisition of Cape Bancorp, Inc. in 2016. This subsidiary is maintained to take legal possession of certain repossessed collateral for resale to third parties. • Country Property Holdings Inc., a New York corporation, was acquired by the Bank as a wholly-owned subsidiary as part of its acquisition of Country Bank in 2020. This subsidiary is maintained to take legal possession of certain repossessed collateral for resale to third parties. • Spring Garden Capital Group, LLC, a Delaware limited liability company, was acquired by the Bank on October 1, 2024 to expand the Bank’s specialty finance offerings. This subsidiary is the holding company for Spring Garden Lending Group, LLC, a specialty lending company, Spring Garden Capital Advisors, LLC, a real estate consulting company, and Spring Garden Equity, LLC, a mezzanine finance company. Spring Garden Lending Baltimore, LLC, a specialty lending company, is also a wholly owned subsidiary of Spring Garden Lending Group, LLC. • OFB Acquisition LLC, a New Jersey limited liability company, was incorporated on August 1, 2024 as a wholly-owned subsidiary. The subsidiary holds certain assets and liabilities acquired through acquisitions. In addition to the Bank, the Company holds OceanFirst Risk Management, Inc. as a direct subsidiary. OceanFirst Risk Management Inc. is a Nevada captive insurance company that insures certain risks relating to the business of the Bank and the Company. The Company also holds a 60% interest in Trident Abstract Title Agency, LLC, a New Jersey corporation, which was acquired in 2022. This subsidiary provides commercial and residential title services throughout New Jersey, and through strategic alliances can also service clients’ title insurance needs outside of New Jersey. Furthermore, the Company holds the following statutory business trusts: OceanFirst Capital Trust I, OceanFirst Capital Trust II, OceanFirst Capital Trust III, Sun Statutory Trust VII, Sun Capital Trust VII, Sun Capital Trust VIII, and Country Bank Statutory Trust I, collectively known as the “Trusts”. All of the Trusts are incorporated in Delaware and were formed to issue trust preferred securities. Human Capital OceanFirst’s long-term growth and success depends on its ability to attract, develop and retain a high-performing workforce. The Company strives to provide a work environment that promotes collaboration, productivity, and employee engagement, which in turn drives both employee and customer success, as well as benefits the communities. The Company’s Board of Directors and Executive Team oversee the strategic management of the Company’s human capital resources and the Human Resources department manages the day-to-day of those resources. 18 Employee profile As of December 31, 2024, the Bank had 951 full-time employees, 56 part-time employees, and 24 commissioned employees, for a total of 1,031 employees. Approximately 67% of the Bank’s employees are female and 33% are male, and the average tenure was over seven years . Of the Bank’s managers, 52% are female as of December 31, 2024. Total rewards As part of the Bank’s compensation philosophy, market competitive total rewards programs are maintained for employees to attract and retain superior talent. In addition to competitive base wages, additional programs include annual bonus compensation opportunities, a Bank Employee Stock Ownership Plan (“ESOP”), a Bank matched 401(k) Plan, health and welfare benefits, flexible spending accounts, paid time off, family leave, and employee assistance programs. Some employees also receive grants of equity awards in the Company’s stock and non-equity awards that mirror the Company’s stock performance. In addition, the Bank promotes health and wellness by encouraging work-life balance, offering flexible work schedules and sponsoring various programs, focusing on mental, emotional, social, intellectual, and spiritual health. Talent A core tenet of the Bank’s talent philosophy is to both develop talent from within and supplement with external hires. Whenever possible, the Bank seeks to fill positions by promotion and transfer from within the organization. The Bank’s talent acquisition team uses internal and external resources to recruit highly skilled and talented candidates; employee referrals are also encouraged. The Company is dedicated to recruitment and career development practices that support its employees at all levels of the Company. The Company is committed to having a workforce that reflects the communities in which it serves. The internship program and the EDGE program (an entry level development program) also serve as a pipeline of early career talent for full time employment. Other available tools are also utilized to connect with prospective new hires. Following a multi-pronged recruiting strategy, new hires participate in an onboarding program which includes an introduction to the Bank’s culture, policies, and procedures. New employees are assigned an ambassador, who extends the integration process beyond the typical orientation experience. Retention strategies include espousing a culture that inspires loyalty and trust through ongoing communication of strategic initiatives and executive roundtable conversations, in addition to the benefits mentioned above in Total rewards . The Bank’s leadership development programs and opportunities offered through OceanFirst Bank University help ensure that motivated individuals have the opportunity for continuous improvement. Employees each maintain a professional development action plan and participate in regular evaluation and growth opportunities. The Bank’s peer recognition program provides the space for ongoing recognition and celebration of accomplishments. This approach has yielded loyalty and commitment from employees which in turn grows the business, products, and customers. This approach has also added new employees and ideas, which support a continuous improvement mindset and the goals of a collaborative workforce. REGULATION AND SUPERVISION General The Company is a bank holding company (“BHC”) under Section 3 of the Bank Holding Company Act of 1956, as amended (the “BHC Act”). As a bank holding company, the Company is subject to the requirements of the BHC Act, including required approvals for investments in or acquisitions of banking organizations, or entities involved in activities that are deemed closely related to banking, capital adequacy standards, and limitations on non-banking activities. The Company is registered with the FRB and is required by Federal law to file reports with, and comply with the rules and regulations of the FRB. The Bank is a member of the FHLB System and, with respect to deposit insurance, of the Deposit Insurance Fund (“DIF”) managed by the FDIC. The Bank is subject to extensive regulation, examination, and supervision by the OCC, as its primary federal regulator, and the FDIC, as the deposit insurer. As a financial institution with more than $10 billion in assets, the Bank is also subject to examination by the CFPB. The Bank must file reports with the OCC and the FDIC concerning its activities and financial condition in addition to obtaining regulatory approvals prior to consummating certain transactions such as mergers with, or acquisitions of, other insured depository institutions. The OCC conducts periodic examinations to test the Bank’s safety and soundness and compliance with various regulatory requirements. This regulation and supervision establishes a comprehensive 19 framework of activities in which an institution can engage and is intended primarily for the protection of the DIF and depositors and to ensure the safe and sound operation of the Bank. The regulatory structure also gives the regulatory authorities extensive discretion in connection with their supervisory and enforcement activities and examination policies, including policies with respect to the classification of assets and the establishment of adequate allowance for credit losses for regulatory purposes. In addition, the Company elected to become a financial holding company under the Gramm-Leach Bliley Act (the “GLBA”) amendments to the BHC Act. Financial holding companies that continue to meet the applicable requirements, and the non-bank companies under their control, are permitted to engage in activities considered financial in nature or incidental to financial activities and, if the FRB determines that they pose no risk to the safety or soundness of depository institutions or the financial system in general, activities that are considered complementary to financial activities. The banking industry is highly regulated. Both the scope of the laws and regulations and the intensity of supervision to which the Company and the Bank are subject to have increased in recent years, in response to the financial crisis as well as other factors such as technological and market changes. Many of these changes have occurred as a result of the Dodd-Frank Act and its implementing regulations. In addition, in 2018, the Economic Growth, Regulatory Relief and Consumer Protection Act (the “EGRRCPA”) was enacted. This legislation includes targeted amendments to the Dodd-Frank Act and other financial services laws. Statutory and regulatory controls increase a BHC’s cost of doing business and limit the options of its management to deploy assets and maximize income. The following discussion is not intended to be a complete list of all the activities regulated by the banking laws or of the impact of such laws and regulations on the Company or the Bank. It is intended only to briefly summarize some material provisions. The description of statutory provisions and regulations applicable to national banks and BHCs set forth in this Form 10-K does not purport to be a complete description of such statutes and regulations and their effects on the Bank and the Company, is subject to change and is qualified in its entirety by reference to the actual laws and regulations involved. The Dodd-Frank Act . The Dodd-Frank Act significantly changed the bank regulatory structure and affects the lending, deposit, investment, compliance, and operating activities of financial institutions and their holding companies. The Dodd-Frank Act created the CFPB with broad p owers to supervise and enforce consumer protection laws. The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The CFPB has examination and enforcement authority over all banks with more than $10 billion in assets. At December 31, 2024, the Bank’s total assets were $13.42 billion and, therefore, the Bank is subject to CFPB supervision and examination for compliance with specified Federal consumer protection laws. Additionally, the Dodd-Frank Act includes a series of provisions covering mortgage loan origination standards affecting, among other things, originator compensation, minimum repayment standards and prepayments. The Dodd-Frank Act requires originators to make a reasonable and good faith determination based on documented information that a borrower has a reasonable ability to repay a particular mortgage loan over the long term and establishes certain protections from liability under this requirement for “qualified mortgages”. The Ability-To-Repay/Qualified Mortgage Rule defines several categories of “qualified mortgage” loans, which obtain certain protections from liability. For further discussion, refer to Risk Factors – Risks Related to Lending Activities – The Dodd-Frank Act imposes obligations on originators of residential mortgage loans . The Dodd-Frank Act also requires that the amount of any interchange fee received by a debit card issuer with respect to debit card transactions be reasonable and proportional to the cost incurred by the issuer with respect to the transaction. Rules adopted by the FRB to implement these requirements limit interchange fees per debit card transaction collected by banks with assets of $10 billion or mor e. In addition, market forces may result in reduced fees charged by all issuers, regardless of asset size, which may result in reduced revenues for the Bank. For the year ended December 31, 2024 and 2023, the Bank’s revenues from interchange fees were $5.1 million and $5.0 million, respectively. The 2024 and 2023 average net interchange fee per transaction were both $0.14. Economic Growth, Regulatory Relief and Consumer Protection Act . EGRRCPA was intended to provide regulatory relief to midsized and regional banks. While many of its provisions are aimed at larger institutions, such as raising the threshold to be considered a systemically important financial institution to $250 billion in assets from $50 billion in assets, many of its provisions provide regulatory relief to those institutions with $10 billion or more in assets. Among other things, the EGRRCPA increased the asset threshold for depository institutions and holding companies to perform stress tests required under Dodd Frank from $10 billion to $250 billion in total consolidated assets, and raised the threshold for the requirement that publicly traded holding companies have a risk committee from $10 billion in consolidated assets to $50 billion in consolidated assets. In 20 addition, the EGRRCPA limited the definition of loans that would be subject to the higher risk weighting applicable to high volatility commercial real estate. Volcker Rule . Under the provisions of the Volcker Rule, insured depository institutions and companies affiliated with insured depository institutions (collectively, “banking entities”) are prohibited from: (i) engaging in short-term proprietary trading for their own account; and (ii) having certain investments in, and relationships with, hedge funds, private equity funds and similar funds, subject to certain exemptions, in each case as the applicable terms are defined in the Volcker Rule and the implementing regulations. The implementing regulations also require banking entities to establish and maintain a compliance program to ensure adherence with the Volcker Rule requirements. Bank Holding Company Regulation The Company is a BHC and is supervised by the FRB and is required to file reports with the FRB and provide such additional information as the FRB may require. The Company and its non-bank subsidiaries are subject to examination by the FRB. FRB regulations provide that a BHC is expected to act as a source of financial and managerial strength to its subsidiary bank and to commit resources to support the subsidiary banks in circumstances in which it might not do so absent those regulations. Holding Company Consolidated Capital Requirements . The Dodd-Frank Act requires capital rules and the application of the same leverage and risk-based capital requirements that apply to insured depository institutions to most bank holding companies. In addition to making bank holding companies subject to the same capital requirements as their bank subsidiaries, these provisions (often referred to as the Collins Amendment to the Dodd-Frank Act) were also intended to eliminate or significantly reduce the use of hybrid capital instruments, especially trust preferred securities, as regulatory capital. At December 31, 2024 , the Company exceeded all regulatory capital requirements currently applicable. The following table presents the Company’s capital position at December 31, 2024 : Capital As of December 31, 2024 Actual Capital Required Capital Excess Amount Actual Percent Required Percent OceanFirst Financial Corp: (dollars in thousands) Tier 1 capital (to average assets) $ 1,235,832 $ 520,239 $ 715,593 9.50 % 4.00 % Common equity Tier 1 (to risk-weighted assets) 1,105,180 692,897 412,283 11.17 7.00 (1) Tier 1 capital (to risk-weighted assets) 1,235,832 841,375 394,457 12.49 8.50 (1) Total capital (to risk-weighted assets) 1,437,278 1,039,345 397,933 14.52 10.50 (1) (1) Includes the Capital Conservation Buffer of 2.50%. Dividends and repurchase of common stock . The FRB has issued a policy statement regarding the payment of dividends and the repurchase of shares of common stock by BHCs. In general, the policy provides that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the BHC appears consistent with the organization’s capital needs, asset quality, and overall financial condition. Regulatory pressures to reclassify and charge off loans and to establish additional credit loss reserves can have the effect of reducing current operating earnings and thus impacting an institution’s ability to pay dividends. Further, regulatory guidance provides for prior regulatory review of capital distributions in certain circumstances such as where the BHC’s net income for the past four quarters, net of dividends previously paid over that period is insufficient to fully fund the dividend, the proposed dividend exceeds earnings for the period for which it is being paid, or the BHC’s overall rate of earnings retention is inconsistent with the BHC’s capital needs and overall financial condition. The guidance also provides for prior consultation with supervisory staff for material increases in the amount of a BHC’s common stock dividend. The ability of a BHC to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. The policy statement also states that a BHC should inform the FRB supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the BHC is experiencing financial weaknesses or if the repurchase or redemption would result in a net reduction in the amount of such instruments outstanding from the beginning of the quarter in which the redemption or repurchase occurred compared with the end of such quarter. These regulatory policies may affect the ability of the BHC to pay dividends, repurchase shares of common stock, or otherwise engage in capital distributions. 21 Acquisition of the Company . Under the Change in Bank Control Act, no person may acquire control of a BHC, such as the Company, unless the FRB has been given 60 days prior written notice and has not issued a notice disapproving the proposed acquisition, taking into consideration certain factors, including the financial and managerial resources of the acquirer and the competitive effects of the acquisition. Control, as defined for this purpose, means ownership, control, or power to vote 25% or more of any class of voting stock. There is a rebuttable presumption of control upon the acquisition of 10% or more of a class of voting stock if the BHC involved has its shares registered under the Securities Exchange Act of 1934, or if no other persons will own, control or hold the power to vote a greater percentage of that class of voting security after the acquisition. Financial Holding Company Status When the Bank converted to a national bank charter and the Company became a BHC, the Company elected to become a financial holding company. Financial holding companies may engage in a broader scope of activities than a BHC. In addition, financial holding companies may undertake certain activities without prior FRB approval. A financial holding company may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature or incidental or complementary to activities that are financial in nature. Activities that are financial in nature include securities underwriting, dealing and market making; sponsoring mutual funds and investment companies; insurance underwriting and insurance agency activities; merchant banking; and activities that the FRB determines to be financial in nature or incidental to a financial activity or which are complementary to a financial activity and do not pose a safety and soundness risk. A financial holding company that engages in activities that are financial in nature or incidental to a financial activity but not previously authorized by the FRB must obtain approval from the FRB before engaging in such activity. Also, a financial holding company may seek FRB approval to engage in an activity that is complementary to a financial activity, if it shows, among other things, that the activity does not pose a substantial risk to the safety and soundness of its insured depository institutions or the financial system. A financial holding company generally may acquire a company (other than a BHC, bank, or savings association) engaged in activities that are financial in nature or incidental to activities that are financial in nature without prior approval from the FRB. Prior FRB approval is required, however, before the financial holding company may acquire control of more than 5% of the voting shares or substantially all of the assets of a BHC, bank, or savings association. In addition, under the FRB's merchant banking regulations, a financial holding company is authorized to invest in companies that engage in activities that are not financial in nature, as long as the financial holding company makes its investment with the intention of limiting the duration of the investment, does not manage the company on a day-to-day basis, and the company does not cross-market its products or services with any of the financial holding company's controlled depository institutions. If any subsidiary bank of a financial holding company ceases to be “well-capitalized” or “well-managed” and fails to correct its condition within the time period that the FRB specifies, the FRB has authority to order the financial holding company to divest its subsidiary banks. Alternatively, the financial holding company may elect to limit its activities and the activities of its subsidiaries to those permissible for a BHC that is not a financial holding company. If any subsidiary bank of a financial holding company receives a rating under the Community Reinvestment Act (“CRA”) of less than “satisfactory,” then the financial holding company is prohibited from engaging in new activities or acquiring companies other than BHCs, banks, or savings associations until the rating is raised to “satisfactory” or better. For additional information, refer to Regulation of Bank Subsidiary – Community Reinvestment Act and Fair Lending Law. Regulation of Bank Subsidiary Business Activities . The operations of the Bank are subject to requirements and restrictions under federal law, including requirements to maintain reserves against deposits, restrictions on the types and amounts of loans that may be granted, and limitations on the types of investments that may be made and the types of services which may be offered. Various consumer laws and regulations also affect the operations of the Bank. Approval of the OCC is required for branching, bank mergers in which the continuing bank is a national bank, and in connection with certain fundamental corporate changes affecting the Bank. There are various legal limitations, including Sections 23A and 23B of the Federal Reserve Act, as implemented by Regulation W, which govern the extent to which a bank subsidiary may finance or otherwise supply funds to its holding company or its holding company’s non-bank subsidiaries. Capital Requirements . Federal regulations require banks to maintain minimum levels of capital including: a common equity Tier 1 capital to risk-weighted assets ratio of 4.5%, a Tier 1 capital to risk-weighted assets ratio of 6.0%, a total capital to risk-weighted assets ratio of 8.0%, and a Tier 1 capital to total assets leverage ratio of 4.0%. 22 In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risks believed inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and additional Tier 1 capital. Additional Tier 1 capital includes certain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includes Tier 1 capital (common equity Tier 1 capital plus additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and related surplus, meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities, intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for credit losses limited to a maximum of 1.25% of risk-weighted assets. Unrealized gains and losses on certain available-for-sale securities are included for purposes of calculating regulatory capital unless a one-time opt-out is exercised. The Bank has exercised the opt-out. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. In assessing an institution’s capital adequacy, federal regulators take into consideration, not only these numeric factors, but qualitative factors as well, and have the authority to establish higher capital requirements for individual banks where necessary. In addition to establishing the minimum regulatory capital requirements, regulations limit capital distributions and certain discretionary bonus payments to management if the institution does not hold a “capital conservation buffer” consisting of 2.50% of common equity Tier 1 capital to risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. Both the Bank and the Company are in compliance with the capital conservation buffer requirements applicable to them. The federal banking agencies, including the OCC, have also adopted regulations to require an assessment of an institution’s exposure to declines in the ec onomic value of a bank’s capital due to changes in interest rates when assessing the bank’s capital adequacy. Under such a risk assessment, examiners evaluate a bank’s capital for interest rate risk on a case-by-case basis, with consideration of both quantitative and qualitative factors. Institutions with significant interest rate risk may be required to hold additional capital. According to the federal banking agencies, applicable considerations include: quality of the bank’s interest rate risk management process; the overall financial condition of the bank; and the level of other risks at the bank for which capital is needed. At December 31, 2024, the Bank exceeded all regulatory capital requirements currently applicable . The following table presents the Bank’s capital position at December 31, 2024: Capital As of December 31, 2024 Actual Capital Required Capital Excess Amount Actual Percent Required Percent Bank: (dollars in thousands) Tier 1 capital (to average assets) $ 1,161,564 $ 516,798 $ 644,766 8.99 % 4.00 % Common equity Tier 1 (to risk-weighted assets) 1,161,564 687,383 474,181 11.83 7.00 (1) Tier 1 capital (to risk-weighted assets) 1,161,564 834,679 326,885 11.83 8.50 (1) Total capital (to risk-weighted assets) 1,238,011 1,031,074 206,937 12.61 10.50 (1) (1) Includes the Capital Conservation Buffer of 2.50%. Prompt Corrective Action. Federal law requires, among other things, that the federal bank regulatory authorities take prompt corrective action with respect to insured depository institutions that do not meet minimum capital requirements. For these purposes, the law establishes five categories: well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. The FDIC’s regulations define the five categories as follows: An institution is classified as well capitalized if: • it has a leverage ratio of 5% or greater; and • it has common equity Tier 1 ratio of 6.5% or greater; and • it has a Tier 1 risk-based capital ratio of 8% or greater; and • it has a total risk-based capital ratio of 10% or greater; and • it is not subject to any written agreement, order or capital directive, or prompt corrective action directive issued by the OCC to meet and maintain a specific capital level for any capital measure. 23 An institution is classified as adequately capitalized if: • it has a leverage ratio of less than 4%; and • it has a common equity Tier 1 ratio of 4.5% or greater; and • it has a Tier 1 risk-based capital ratio of 6%; and • it has a total risk-based capital ratio of 8% or greater. An institution is classified as undercapitalized if: • it has a leverage ratio of less than 4%; or • it has a common equity Tier 1 ratio of less than 4.5%; or • it has a Tier 1 risk-based capital ratio of less than 6%; or • it has a total risk-based capital ratio of less than 8%. An institution is classified as significantly undercapitalized if: • it has a leverage ratio of less than 3%; or • it has a common equity Tier 1 ratio of less than 3%; or • it has a Tier 1 risk-based capital ratio of less than 4%; or • it has a total risk-based capital ratio of less than 6%. An institution that has a tangible capital to total assets ratio equal to or less than 2% is deemed to be critically undercapitalized. The regulations provide that a capital restoration plan must be filed with the OCC within 45 days of the date a national bank receives notice that it is “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized.” Any BHC for the bank required to submit a capital restoration plan must guarantee the lesser of an amount equal to 5.0% of the bank’s assets at the time it was notified or deemed to be undercapitalized by the OCC, or the amount necessary to restore the bank to adequately capitalized status. Various restrictions, including as to growth and capital distributions, also apply to “undercapitalized” institutions. If an “undercapitalized” institution fails to submit an acceptable capital restoration plan, it is treated as “significantly undercapitalized.” “Significantly undercapitalized” institutions must comply with one or more additional restrictions including, but not limited to: an order by the OCC to sell sufficient voting stock to become adequately capitalized; a requirement to reduce total assets, cease receipt of deposits from correspondent banks, or dismiss officers or directors; and limitations on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company. Critically undercapitalized institutions are subject to the appointment of a receiver or conservator. The OCC may also take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the issuance of a capital directive. Based on the regulatory guidelines, the Bank satisfies the criteria to be well-capitalized at December 31, 2024. Insurance of Deposit Accounts . Deposit accounts at the Bank are insured by the DIF of the FDIC up to a maximum of $250,000 per separately insured depositor. The FDIC charges insured depository institutions premiums to maintain the DIF. Under the FDIC’s risk-based assessment system, institutions deemed less risky pay lower FDIC assessments. Assessments for institutions with $10 billion or more of assets are primarily based on a scorecard approach by the FDIC, including factors such as examination ratings and modeling measuring the institution’s ability to withstand asset-related and funding-related stress and potential loss to the DIF should the bank fail. Additionally, on November 29, 2023, the FDIC adopted a final rule, effective on April 1, 2024, to implement a special assessment to recover the loss to the DIF arising from the protection of uninsured depositors following the closures of Silicon Valley Bank and Signature Bank in the spring of 2023. The FDIC will collect the special assessment at a quarterly rate multiplied by an insured depository institution’s estimated uninsured deposits, reported for the quarter that ended December 31, 2022, adjusted to exclude the first $5 billion in estimated uninsured deposits, over an initial eight quarterly assessment periods and currently projects that the special assessment will be collected for an initial two quarters at a lower rate. The first of the collection periods was the first quarterly assessment period of 2024 (i.e., January 1 through March 31, 2024) with a payment date of June 28, 2024. The FDIC has authority to increase insurance assessments. Any significant increases would have an adverse effect on the Bank’s operating expenses and results of operations. The Bank cannot predict what assessment rates will be in the future. The FDIC may terminate the insurance of an institution’s deposits upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. The management of the Bank does not know of any practice, condition, or violation that might lead to termination of deposit insurance. 24 The total deposit insurance assessment expenses incurred in 2024 and 2023 were $9.7 million and $9.9 million, respectively. The expenses in 2024 and 2023 were impacted by the FDIC approval of the final rule to implement a special assessment as noted above. As a result, the Bank incurred a special assessment of $418,000 and $1.7 million for the years ended December 31, 2024 and 2023. Loans to One Borrower . Subject to certain exceptions, a national bank may not make a loan or extend credit to a single or related group of borrowers in excess of 15% of its unimpaired capital and surplus. An additional amount may be lent, equal to 10% of unimpaired capital and surplus, if secured by specified readily-marketable collateral, which generally does not include real estate. As of December 31, 2024, the Bank was in compliance with the loans-to-one borrower limitations. Limitation on Capital Distributions . Applicable regulations impose limitations upon all capital distributions by a banking institution, including cash dividends, payments to repurchase its shares and payments to stockholders of another institution in a cash-out merger. Under the regulations, an application to and the approval of the OCC, is required prior to any capital distribution if the total capital distributions for the calendar year exceeds net income for that year plus the amount of retained net income for the preceding two years. A national bank may not pay a dividend if it would be undercapitalized following the distribution or the distribution would otherwise be contrary to a statute, regulation or agreement with the OCC. A national bank may be further limited in payment of cash dividends if it does not maintain the capital conservation buffer. In the event the Bank’s capital fell below its regulatory requirements or the OCC notified the Bank that it was in need of more than normal supervision, the Bank’s ability to make capital distributions could be restricted. In addition, the OCC could prohibit a proposed capital distribution by any institution, which would otherwise be permitted by the regulation, if the OCC determines that such distribution would constitute an unsafe or unsound practice. If the Bank is unable for any reason to pay a dividend to the Company, the Company may not have the liquidity necessary to pay a dividend in the future, pay a dividend at the same rate as historically paid, be able to repurchase stock, or to meet current debt obligations. In addition, capital requirements made applicable to the Company as a result of the Dodd-Frank Act and Basel III may limit the Company’s ability to pay dividends or repurchase stock in the future. The Company may also be required to receive non-objection letters prior to performing any actions that may impact the Company’s capital. Assessments . Banking institutions are required to pay OCC assessments to fund regulatory operations. The assessments, paid on a semi-annual basis, are based upon the institution’s total assets, including consolidated subsidiaries as reported in the Bank’s latest quarterly regulatory report, as well as the institution’s regulatory rating and complexity component. The assessments paid by the Bank totaled $1.3 million and $1.2 million, respectively, for the years ended December 31, 2024 and 2023. For calendar year 2025, the OCC is increasing the marginal rates in the general assessment fee schedule for assets $40 billion and below by a factor of 2.65% to account for inflation. Transactions with Related Parties . The Bank’s authority to engage in transactions with affiliates (e.g., any company that controls or is under common control with an institution, including the Company and its non-bank subsidiaries) is limited by federal law. The aggregate amount of “covered transactions” with any individual affiliate is limited to 10% of the capital and surplus of the bank. The aggregate amount of “covered transactions” with all affiliates is limited to 20% of the bank’s capital and surplus. Certain transactions with affiliates are required to be secured by collateral in an amount and of a type described in federal law. The purchase of low quality assets from affiliates is generally prohibited. Transactions with affiliates must generally be on terms and under circumstances that are substantially the same, or that are at least as favorable to the institution as those prevailing at the time for comparable transactions with or involving non-affiliated companies. In addition, banks are prohibited from lending to any affiliate that is engaged in activities that are not permissible for BHCs and no bank may purchase the securities of any affiliate other than a subsidiary. Community Reinvestment Act. All national banks have a responsibility under the CRA and related federal regulations to help meet the credit needs of their communities, including low- and moderate- income neighborhoods. In connection with its examination of a national bank, the OCC is required to evaluate and rate the bank’s record of compliance with the CRA. A national bank’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on certain of its activities such as branching or mergers. In 2023, the FDIC, the FRB, and the OCC issued a final rule to strengthen and modernize the CRA regulations. Under the final rule, banks with assets of at least $2 billion as of December 31 in both of the prior two calendar years will be a “large bank.” The agencies will evaluate large banks under four performance tests: the Retail Lending Test, the Retail Services and Products Test, the Community Development Financing Test, and the Community Development Services Test. The final rule was scheduled to take effect on April 1, 2024 and the applicability date for the majority of the provisions in the CRA regulations was January 1, 2026 with additional requirements applicable on January 1, 2027. However, the final rule is subject to legal challenges that have pushed back the implementation date and compliance deadlines. On March 29, 2024, a federal court in the Northern District of Texas issued a preliminary injunction of the new CRA regulations, enjoining the federal banking agencies 25 from enforcing the regulations against the plaintiff bank industry trade groups, and extending the regulations’ implementation dates day-for-day for each day the injunction is in place. During 2025, the Bank received a CRA Performance Evaluation from the OCC with a rating of “Outstanding” for the evaluation period from 2021 to 2023, for which the examination commenced in 2024. Fair Lending Law . The Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices based on the characteristics specified in those statutes. A national bank’s failure to comply with the provisions of the CRA could, at a minimum, result in regulatory restrictions on certain of its activities such as branching or mergers. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice. On September 18, 2024, the Bank voluntarily entered into settlement agreements with the United States Department of Justice (the “DOJ”) and United States Department of Housing and Urban Development to resolve claims that the Bank violated the Equal Credit Opportunity Act and Fair Housing Act in the New Brunswick-Lakewood, New Jersey lending area, which includes Middlesex, Monmouth and Ocean counties. Under the Agreements, the Bank has committed to invest at least $14 million in a mortgage loan subsidy fund for eligible residents in Middlesex and Monmouth counties over a five-year period. The Bank also has agreed to invest $400,000 in community partnerships, spend $140,000 per year in targeted marketing, advertising and outreach in the New Brunswick-Lakewood area which includes Middlesex, Monmouth and Ocean counties, and provide financial education workshops designed to expand access to home mortgage credit. As of December 31, 2024, the Bank believes it is on track to comply with the commitments entered into the settlement agreements. The Bank also will continue lending and community development initiatives that pre-date the settlement, and which are designed to increase access to residential lending and other financial services in the New Brunswick market and across its footprint. Since 2020, the Bank has provided over $625 million in loans and investments benefiting thousands of people in the communities it serves. Federal Home Loan Bank System The Bank is a member of the Federal Home Loan Bank System, which consists of 11 regional FHLBs. Each FHLB provides member institutions with a central credit facility. The Bank, as a member of the FHLB New York is required to acquire and hold shares of capital stock in that FHLB in a specified amount. The Bank was in compliance with this requirement with an investment in FHLB New York stock at December 31, 2024 and 2023 of $68.4 million and $53.7 million, respectively. Federal Reserve System As a national bank, the Bank is required to hold capital stock of the Federal Reserve Bank of Philadelphia. The required shares may be adjusted up or down based on changes to the Bank's common stock and paid-in surplus. The Bank is in compliance with these requirements, with a total investment in Federal Reserve Bank of Philadelphia stock of $39.8 million and $39.7 million at December 31, 2024 and 2023, respectively. The Federal Reserve Bank of Philadelphia pays dividends on the common stock held by the Bank. However, the level of dividends is reduced for financial institutions that exceed a certain asset size. For 2024, the asset level is $12.52 billion, and financial institutions whose assets exceed that level receive dividends generally equal to the rate of the 10-year Treasury note, which totaled $1.7 million for the year ended December 31, 2024, as compared to $1.6 million in the prior year.